Surrey Bancorp Reports Third Quarter Net Income of $1,052,172

MOUNT AIRY, N.C., Oct. 27, 2020 (GLOBE NEWSWIRE) -- Surrey Bancorp (the “Company”), (Pink Sheets: SRYB), the holding company for Surrey Bank & Trust, today reported earnings for the third quarter of 2020.

For the quarter ended September 30, 2020, net income totaled $1,052,172 or $0.25 per fully diluted share, compared to $1,676,806 or $0.40 per fully diluted common share earned during the third quarter of 2019.

The decrease in earnings results from a decrease in net interest income and an increase in the provision for loan losses. Net interest income decreased from $3,658,136 in the third quarter of 2019 to $3,084,814 in the third quarter of 2020. The provision for loan losses increased from a provision recapture of $131,847 in the third quarter of 2019 to a provision of $196,073 in the third quarter of 2020.

The decrease in net interest income is the result of the sudden decrease in interest rates due to the COVID 19 pandemic. Loan yields decreased from 6.10 percent in the third quarter of 2019 to 4.78 percent in the same quarter of 2020. The yield on interest earning assets decreased from 5.42 percent to 3.51 percent from the third quarter of 2019 to the third 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 carried approximately $47,330,000 of PPP loans in its loan portfolio at the end of the third 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 0.51 percent in the third quarter of 2019 to 0.32 percent in 2020 due to general rate decreases.

The provision for loan losses increased $327,920 in the third quarter of 2020 compared to the third quarter of 2019. This increase is due to the estimated economic impact of the current pandemic.

Noninterest income remained virtually unchanged amounting to $619,965 in the third quarter of 2020 compared to $619,031 in during the same period in 2019. Noninterest expenses decreased 2.6 percent from $2,222,108 in the third quarter of 2019, compared to $2,163,334 in 2020.

Loan loss reserves were $4,714,718 or 1.67 percent of total loans as of September 30, 2020. Non-performing assets were 0.11 percent of total assets on September 30, 2020, compared to 0.38 percent on that date in 2019. On September 30, 2020, the allowance for loan loss reserves equals 530 percent of impaired and non-performing assets, net of government guarantees.

Total assets were $425,396,540 as of September 30, 2020, an increase of 28.3 percent from $331,633,605 reported as of September 30, 2019. Total deposits were $368,066,800 at quarter-end 2020, a 32.3 percent increase from the $278,110,833 reported at the end of the third quarter of 2019. Net loans increased to $277,613,456, or 18.0 percent, compared to $235,290,731, on September 30, 2019.

Net income for the nine months ended September 30, 2020, was $3,079,747 or $0.74 per diluted share, compared to $3,784,221 or $0.91 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.

(Dollars in thousands, except per share amounts)
  September 30,
  December 31,
  September 30,
  (unaudited)    (audited)  (unaudited) 
Total assets $425,397  $329,520  $331,634 
Total loans  282,328   237,393   239,392 
Investments  124,282   72,777   66,457 
Deposits  368,067   276,360   278,111 
Stockholders’ equity  49,698   47,927   47,727 
Non-performing assets to total assets  0.11%  0.38%  0.38%
Loans past due more than 90 days to total loans  0.02%  0.02%  0.02%
Allowance for loan losses to total loans  1.67%  1.74%  1.72%
Tangible book value per common share $11.50  $11.20  $11.15 

(Dollars in thousands, except per share amounts)
  For the Three Months
Ended September 30,
  For the Nine Months
Ended September 30,
  2020  2019  2020  2019 
Interest income $3,360  $3,994  $10,054  $11,199 
Interest expense  275   336   900   956 
Net interest income  3,085   3,658   9,154   10,243 
Provision for loan losses  196   (132)  564   78 
Net interest income after provision for loan losses  2,889   3,790   8,590   10,165 
Noninterest income  619   619   1,989   1,872 
Noninterest expense  2,163   2,222   6,633   6,901 
Net income before taxes  1,345   2,187   3,946   5,136 
Provision for income taxes  293   510   866   1,352 
Net income  1,052   1,677   3,080   3,784 
Basic net income per share $0.25  $0.40  $0.74  $0.91 
Diluted net income per share $0.25  $0.40  $0.74  $0.91 
Return on average total assets(1)  1.03%  2.10%  1.10%  1.61%
Return on average total equity(1)  8.49%  14.17%  8.40%  10.86%
Yield on average interest earning assets  3.51%  5.42%  3.81%  5.16%
Cost of funds  0.32%  0.51%  0.38%  0.49%
Net yield on average interest earning assets  3.23%  4.96%  3.47%  4.72%
Overhead efficiency ratio  58.39%  51.95%  59.53%  56.96%
Net charge-offs (recoveries)/average loans  0.01%  0.10%
  (0.01)%  0.07%

(1) Annualized for all periods presented.


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