MOUNT AIRY — Surrey Bancorp (the “Company”), (Pink Sheets: SRYB), the holding company for Surrey Bank & Trust, recently reported earnings for the second quarter of 2017.
For the quarter ended June 30, net income totaled $962,480 or $0.23 per fully diluted share, compared to $1,138,821 or $0.27 per fully diluted common share earned during the second quarter of 2016.
Net income for the three months ended June 30, is about 15.5 percent lower than for the same period in 2016. The decrease in earnings results from a decrease in noninterest income. Noninterest income decreased from $938,921 in the second quarter of 2016 to $603,236 in 2017. The decrease primarily results from the recording of $315,754 in tax exempt life insurance proceeds during the quarter ended June 30, 2016. Net interest income decreased from $2,744,970 in the second quarter of 2016 to $2,730,717 in 2017. This decrease is due to a tightening of the net interest margin and a change in the earning asset mix.
The net interest margin decreased from 4.65 percent to 4.23 percent from 2016 to 2017. Asset yields decreased from 5.02 percent in 2016 to 4.58 percent in 2017. Loan yields fell from 5.60 percent in the second quarter of 2016 to 5.37 percent during the quarter ending in 2017. Although average loans outstanding increased 10.0 percent from the second quarter of 2016 to 2017, the higher yielding loans made up a smaller percentage of total average earning assets in the second quarter of 2017 compared to the second quarter of 2016. Average loans as a percentage of earning assets decreased from 88.3 percent in the second quarter of 2016 to 81.9 percent of earning assets in 2017.
The cost of funds decreased slightly from 0.42 percent in the second quarter of 2016 to 0.39 percent in the second quarter of 2017 as certificates of deposit made up a lower percentage of average deposits. The provision for loan losses decreased from a provision of $136,927 in the second quarter of 2016 to a provision recapture of $135,998 in 2017, a $272,925 decrease. The provision decrease is partially due to the recovery of loans charged off in prior periods and the effects of the recoveries on the historical loss calculations. Net charge off recoveries amounted to $94,715 in the second quarter of 2017 compared to net charge offs of $90,726 in the second quarter of 2016.
Noninterest income excluding life insurance proceeds decreased 3.2 percent from the second quarter of 2016 to the second quarter of 2017. Reductions in mortgage loan fees accounted for most of the decrease. Noninterest expenses increased 1.7 percent from $1,956,297 in the second quarter of 2016, to $1,988,871 in 2017. This increase was primarily due to an increase in professional fees that increased from $35,684 in the second quarter of 2016 to $99,468 in 2017. In 2016 professional fees were significantly reduced due to recoveries of legal fees associated with charged off loans.
Loan loss reserves were $3,584,914 or 1.68 percent of total loans as of June 30. Non-performing assets were 0.34 percent of total assets at June 30, compared to 0.67 percent on that date in 2016. At June 30, the allowance for loan loss reserves equals 128 percent of impaired and non-performing assets, net of government guarantees.
Total assets were $283,821,022 as of June 30, an increase of 8.1 percent from $262,650,694 reported as of June 30, 2016. Total deposits were $236,363,048 at quarter-end 2017, a 9.1 percent increase from the $216,689,033 reported at the end of the second quarter of 2016. Net loans increased to $210,754,322, or 1.4 percent, compared to $207,918,096, at June 30, 2016.
Net income for the six months ended June 30 was $1,910,205 or $0.46 per diluted share, compared to $1,915,775 or $0.46 per diluted share, for the same period in 2016.