MOUNT AIRY, N.C., Oct. 23, 2018 (GLOBE NEWSWIRE) -- Surrey Bancorp (the “Company”), (Pink Sheets: SRYB), the holding company for Surrey Bank & Trust, today reported earnings for the third quarter of 2018.
For the quarter ended September 30, 2018, net income totaled $1,276,940 or $0.31 per fully diluted share, compared to $801,381 or $0.19 per fully diluted common share earned during the third quarter of 2017.
The increase in earnings results from an increase in net interest income and a reduction in the provision for income taxes due to the rate reductions in the Tax Cuts and Jobs Act. Net interest income increased from $2,837,450 in the third quarter of 2017 to $3,274,454 in the third quarter of 2018. Income tax expense decreased from $426,300, on an income before income taxes of $1,227,681 in 2017 to $377,000, on an income before income taxes of $1,653,940 in 2018. This is a reduction in the effective income tax rate from 34.7 percent to 22.8 percent.
The increase in net interest income is due to loan growth and an improved net interest margin. Average loans outstanding in the third quarter of 2018 amounted to $235,525,596 compared to $215,122,300 in the third quarter of 2017. Loan yields increased from 5.42 percent in the third quarter of 2017 to 5.53 percent in the same quarter of 2018. Overall interest earning asset yields increased from 4.69 percent to 4.92 percent from the third quarter of 2017 to the third quarter of 2018. These improved yields are due to a general increase in interest rates. The cost of funds was 0.39 percent and 0.38 percent in the third quarter of 2018 and 2017, respectively. Interest costs have remained low due to the increase in non-interest-bearing demand deposit accounts. Average deposits increased from $237,064,377 in the third quarter of 2017 to $258,125,747 in the third quarter of 2018. Non-interest-bearing accounts accounted for $14,356,907, or 68.2 percent of the increase.
The provision for loan losses decreased from $229,116 in the third quarter of 2017 to a provision of $122,398 in 2018, a $106,718 decrease. This decrease is primarily due to charge off recoveries in the third quarter of 2018 of $19,531 and the effects of the recoveries on the historical loss calculations for the quarter. In the third quarter of 2017, $18,381 of loans were charged off.
Noninterest income increased slightly from $638,552 in the third quarter of 2017 to $694,200 in 2018. A gain on the sale of foreclosed assets of $59,278 accounts for the increase. Noninterest expenses increased 8.6 percent from $2,019,205 in the third quarter of 2017, to $2,192,316 in 2018. This increase was primarily due to the increase in employees and other costs associated with the opening of a new branch office in December of 2017.
Loan loss reserves were $4,026,084 or 1.67 percent of total loans as of September 30, 2018. Non-performing assets were 0.13 percent of total assets at September 30, 2018, compared to 0.22 percent on that date in 2017. At September 30, 2018, the allowance for loan loss reserves equals 173 percent of impaired and non-performing assets, net of government guarantees.
Total assets were $309,977,731 as of September 30, 2018, an increase of 3.2 percent from $292,006,764 reported as of September 30, 2017. Total deposits were $260,223,290 at quarter-end 2018, a 6.8 percent increase from the $243,724,920 reported at the end of the third quarter of 2017. Net loans increased to $236,982,420, or 9.3 percent, compared to $216,867,767, at September 30, 2017.
Net income for the nine months ended September 30, 2018, was $3,522,787 or $0.85 per diluted share, compared to $2,711,586 or $0.65 per diluted share, for the same period in 2017.
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 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.
CONSOLIDATED FINANCIAL HIGHLIGHTS
(Dollars in thousands, except per share amounts)
| September 30, 2018 | December 31, 2017 | September 30, 2017 | ||||||||||
| (unaudited) | (audited) | (unaudited) | ||||||||||
| Total assets | $ | 309,978 | $ | 300,510 | $ | 292,007 | ||||||
| Total loans | 241,009 | 224,244 | 220,663 | |||||||||
| Investments | 48,809 | 55,816 | 49,452 | |||||||||
| Deposits | 260,223 | 253,655 | 243,725 | |||||||||
| Borrowed funds | - | - | - | |||||||||
| Stockholders’ equity | 44,360 | 42,046 | 43,151 | |||||||||
| Non-performing assets to total assets | 0.13 | % | 0.16 | % | 0.22 | % | ||||||
| Loans past due more than 90 days to total loans | 0.02 | % | 0.04 | % | 0.00 | % | ||||||
| Allowance for loan losses to total loans | 1.67 | % | 1.72 | % | 1.72 | % | ||||||
| Tangible book value per common share | $ | 10.29 | $ | 10.38 | $ | 10.51 | ||||||
| Common shares outstanding | 4,167,633 | 3,533,735 | 3,533,735 | |||||||||
CONSOLIDATED FINANCIAL HIGHLIGHTS
(Dollars in thousands, except per share amounts)
| For the Three Months Ended September 30, | For the Nine Months Ended September 30, | |||||||||||||||
| 2018 | 2017 | 2018 | 2017 | |||||||||||||
| Interest income | $ | 3,531 | $ | 3,063 | $ | 10,240 | $ | 8,934 | ||||||||
| Interest expense | 257 | 226 | 721 | 675 | ||||||||||||
| Net interest income | 3,274 | 2,837 | 9,519 | 8,259 | ||||||||||||
| Provision for loan losses | 122 | 229 | 209 | (93 | ) | |||||||||||
| Net interest income after provision for loan losses | 3,152 | 2,608 | 9,310 | 8,352 | ||||||||||||
| Noninterest income | 694 | 638 | 1,815 | 1,864 | ||||||||||||
| Noninterest expense | 2,192 | 2,019 | 6,565 | 6,051 | ||||||||||||
| Net income before taxes | 1,654 | 1,227 | 4,560 | 4,165 | ||||||||||||
| Provision for income taxes | 377 | 426 | 1,037 | 1,454 | ||||||||||||
| Net income | 1,277 | 801 | 3,523 | 2,711 | ||||||||||||
| Preferred stock dividend declared | - | 46 | 6 | 137 | ||||||||||||
| Net income available to common shareholders | $ | 1,277 | $ | 755 | $ | 3,517 | $ | 2,574 | ||||||||
| Basic net income per share | $ | 0.31 | $ | 0.21 | $ | 0.89 | $ | 0.73 | ||||||||
| Diluted net income per share | $ | 0.31 | $ | 0.19 | $ | 0.85 | $ | 0.65 | ||||||||
| Return on average total assets (1) | 1.66 | % | 1.12 | % | 1.57 | % | 1.29 | % | ||||||||
| Return on average total equity (1) | 11.58 | % | 7.47 | % | 10.85 | % | 8.59 | % | ||||||||
| Yield on average interest earning assets | 4.92 | % | 4.69 | % | 4.95 | % | 4.60 | % | ||||||||
| Cost of funds | 0.39 | % | 0.38 | % | 0.38 | % | 0.38 | % | ||||||||
| Net yield on average interest earning assets | 4.56 | % | 4.34 | % | 4.61 | % | 4.25 | % | ||||||||
| Overhead efficiency ratio | 55.24 | % | 58.09 | % | 57.93 | % | 59.78 | % | ||||||||
| Net charge-offs (recoveries)/average loans | (0.01 | )% | 0.01 | % % | 0.01 | % | (0.09 | )% | ||||||||
- Annualized for all periods presented.
For additional information, please contact
Ted Ashby, CEO, or Mark Towe, CFO
(336) 783-3900