MOUNT AIRY — The Board of Directors of Surrey Bancorp (Pink Sheets: SRYB) has declared a quarterly cash dividend of 9.5 cents ($0.095) per share on the company’s common stock. The cash dividend is payable on April 10, 2018, to shareholders of record as of the close of business on March 23, 2018. The company has paid seven consecutive special annual dividends. This is the first quarterly dividend payment announced by the company. Ted Ashby, president/CEO of Surrey Bancorp, stated the dividend was based on the company’s current operating results, its strong financial condition and a commitment to delivering shareholder value.
Surrey Bancorp also reported earnings for the fourth quarter of 2017 and the full year.
For the quarter ended Dec. 31, 2017, net income totaled $315,321 or $0.08 per fully diluted share, compared with $895,499 or $0.21 per fully diluted common share earned during the fourth quarter of 2016. The decrease in quarterly earnings results from an increase in the provision for income taxes as a result of a reduction in the value of net deferred tax assets of about $628,000. The reduction was necessitated by the enactment of the Tax Cuts and Jobs Act during the quarter.
Net interest income increased by 2.5 percent from $2,866,692 in the fourth quarter of 2016 to $2,938,607 for the same period in 2017. This increase is due to an increase in interest rates and the resulting increase in interest income from interest bearing balances deposited at other banks. Overall the net interest margin decreased from 4.54 in the fourth quarter of 2016 to 4.40 percent for the same period in 2017 due to a change in the earning asset mix.
Asset yields decreased from 4.90 percent in 2016 to 4.73 percent in 2017. Loan yields fell from 5.75 percent in the fourth quarter of 2016 to 5.52 percent during same quarter in 2017. This decrease was offset by loan growth as average loans outstanding increased 3.4 percent from $211,972,499 in 2016 to $219,285,285 in 2017. Yields on interest bearing bank balances increased from 0.47 percent in the fourth quarter of 2016 to 1.16 percent in 2017. Average interest bearing bank balances increased from $35,219,483 in the fourth quarter of 2016 to $42,148,188 in 2017, going from 13.7 percent of interest earning assets in 2016 to 15.7 percent in 2017.
Although average loans outstanding increased from the fourth quarter of 2016 to 2017, the higher yielding loans made up a smaller percentage of total average earning assets in the fourth quarter of 2017 compared to the fourth quarter of 2016. Average loans as a percentage of earning assets decreased from 83.4 percent in the fourth quarter of 2016 to 81.5 percent of earning assets in 2017. The cost of funds decreased slightly from 0.40 percent in the fourth quarter of 2016 to 0.37 percent in the fourth quarter of 2017 as certificates of deposit made up a lower percentage of average deposits.
The provision for loan losses decreased from $64,752 in the fourth quarter of 2016 to $48,679 in 2017. Noninterest income increased from $742,463 in the fourth quarter of 2016 to $822,353 in 2017. This increase was attributable to increases in deposit service fees and other service charges. Noninterest expenses increased from $2,092,025 in the fourth quarter of 2016 to $2,300,711 in the fourth quarter of 2017. This increase is attributable to expenses associated with equipment purchases.
For the year ended Dec. 31, 2017, the Company reported net income of $3,026,907, or $0.73 per fully diluted common share. This represents a 15.9 percent decrease in profitability from year-end 2016, when the Company reported earnings of $3,596,628, or $0.86 per fully diluted common share. This decrease was attributable to the aforementioned revaluation of net deferred tax assets due to the new tax law enacted in December 2017. Net interest income increased 1.6 percent from $11,018,850 for the year ended 2016 to $11,198,022 at year-end 2017. This increase was due to increases in the Federal funds rate.
Noninterest income decreased 5.5 percent to $2,686,128 in 2017, compared to $2,843,811 reported for the year ended December 31, 2016. This decrease was due to life insurance proceeds in excess of the cash surrender value of $315,754 recorded in 2016. The provision for loan losses decreased from $401,403 in 2016 to a provision recapture of $44,866 in 2017. The net recapture is due to charge off recoveries in 2017 and improved economic conditions which lowered environmental factors used in calculating the loan loss reserve. Noninterest expenses increased 4.4 percent, from $8,002,821 in 2016, to $8,351,960 in 2017. The majority of the increase results from cost associated with cybersecurity, equipment purchases, professional fees and fees associated with government guaranteed lending.
Loan loss reserves were $3,848,006 or 1.72 percent of total loans as of Dec. 31, 2017. Non-performing assets were 0.16 percent of total assets at Dec. 31, 2017, compared to 0.54 percent on that date in 2016. At Dec. 31, 2017, the allowance for loan loss reserves equals 147.9 percent of impaired and non-performing assets, net of government guarantees compared to 105.4 percent at the end of 2016.
Total assets were $300,509,941 as of Dec. 31, 2017, an increase of 8.4 percent from $277,102,385 reported as of Dec. 31, 2016. Total deposits were $253,655,262 at year-end 2017, an increase of 10.2 percent from the $230,261,545 reported at the end of year of 2016. Net loans increased 5.6 percent to $220,395,992 at Dec. 31, 2017, compared to $208,690,443 as of Dec. 31, 2016.
Surrey Bancorp is the bank holding company for Surrey Bank & Trust and is located at 145 N. Renfro St., Mount Airy. The Bank operates full service branch offices at 145 N. Renfro St., 1280 W. Pine St. and 2050 Rockford St. in Mount Airy. Full-service branch offices are also located at 653 S. Key St. in Pilot Mountain, 393 CC Camp Road in Elkin and 1096 Main St. in North Wilkesboro, 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 N. Renfro St. in Mount Airy.
Surrey Bank & Trust can be found online at www.surreybank.com.