MOUNT AIRY — Surrey Bancorp, (Pink Sheets: SRYB), the holding company for Surrey Bank & Trust, reported earnings for the third quarter of 2017.
For the quarter ended Sept. 30, net income totaled $801,381 or $0.19 per fully diluted share, compared to $785,354 or $0.19 per fully diluted common share earned during the third quarter of 2016.
Net income for the three months ended Sept. 30 is about 2.0 percent higher than for the same period in 2016. The increase in earnings results from an increase in net interest income. Net interest income increased from $2,711,787 in the third quarter of 2016 to $2,837,450 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 4.50 in the third quarter of 2016 to 4.34 percent for the same period in 2017 due to a change in the earning asset mix. Asset yields decreased from 4.86 percent in 2016 to 4.69 percent in 2017.
Loan yields fell slightly from 5.46 percent in the third quarter of 2016 to 5.42 percent during same quarter in 2017. This decrease was offset by loan growth as average loans outstanding increased 1.5 percent from $211,979,825 in 2016 to $215,122,300 in 2017. Yields on interest bearing bank balances increased from 0.52 percent in the third quarter of 2016 to 1.34 percent in 2017. Average interest bearing bank balances increased from $23,886,991 in the third quarter of 2016 to $40,556,996 in 2017, going from 9.9 percent of interest earning assets in 2016 to 15.5 percent in 2017.
Although average loans outstanding increased from the third quarter of 2016 to 2017, the higher yielding loans made up a smaller percentage of total average earning assets in the third quarter of 2017 compared to the third quarter of 2016. Average loans as a percentage of earning assets decreased from 87.4 percent in the third quarter of 2016 to 82.0 percent of earning assets in 2017.
The cost of funds decreased slightly from 0.40 percent in the third quarter of 2016 to 0.38 percent in the third quarter of 2017 as certificates of deposit made up a lower percentage of average deposits. Average interest bearing deposits increased 9.6 percent from the third quarter of 2016 from $154,438,353 to $169,297,720 in 2017. This growth lead to a 10.5 percent increase in interest expense on deposits for the quarter ended September 30, 2017. The provision for loan losses increased from $123,910 in the third quarter of 2016 to $229,116 in 2017, a $105,206 increase. The provision increase is due to loan growth.
Noninterest income increased from $623,870 in the third quarter of 2016 to $638,552 in 2017. The increase primarily results from an increase in service charges on deposit accounts and insurance commissions. Noninterest expenses increased 1.0 percent from $1,998,910 in the third quarter of 2016, to $2,019,205 in 2017. This increase was primarily due to an increase in salaries and employee benefits.
Loan loss reserves were $3,795,649 or 1.72 percent of total loans as of Sept. 30. Non-performing assets were 0.22 percent of total assets at Sept. 30, compared to 0.63 percent on that date in 2016. At Sept. 30, the allowance for loan loss reserves equals 356 percent of impaired and non-performing assets, net of government guarantees.
Total assets were $292,006,764 as of Sept. 30, an increase of 8.9 percent from $268,079,225 reported as of Sept. 30, 2016. Total deposits were $243,724,920 at quarter-end 2017, a 10.2 percent increase from the $221,063,810 reported at the end of the third quarter of 2016. Net loans increased to $216,867,767, or 2.8 percent, compared to $211,051,726, at September 30, 2016.
Net income for the nine months ended Sept. 30 was $2,711,586 or $0.65 per diluted share, compared to $2,701,129 or $0.65 per diluted share, for the same period in 2016.