Surrey Bancorp (the “company”), (Pink Sheets: SRYB), the holding company for Surrey Bank & Trust, has reported earnings for the second quarter of 2016.
For the quarter ended June 30, net income totaled $1,138,821 or $0.27 per fully diluted share, compared to $739,936 or $0.18 per fully diluted common share earned during the second quarter of 2015.
Net income for the three months ended June 30 is approximately 53.9% higher than for the same period in 2015. The increase in earnings results from an increase in net interest income and noninterest income.
Net interest income increased from $2,437,301 in the second quarter of 2015 to $2,744,970 in 2016. This increase is due to loan growth. Average loans outstanding increased 9.8% from the second quarter of 2015 to 2016, or approximately $18,741,000.
The net interest margin increased from 4.10% to 4.65% from 2015 to 2016 due to a combination of higher assets yields and lower deposit costs. Asset yields increased from 4.59% in 2015 to 5.02% in 2016 primarily from a change in asset mix and a slight uptick in interest rates.
Higher yielding loans made up 88.3% of average interest earning assets in the second quarter of 2016 as opposed to 80.2% in the second quarter of 2015. The cost of funds decreased from 0.54% in the second quarter of 2015 to 0.42% in the second quarter of 2016 as non-interest bearing deposits made up a higher percentage of average deposits.
The provision for loan losses increased from a provision of $70,298 in the second quarter of 2015 to a provision of $136,927 in 2016, a $66,629 increase. The provision increase is partially due to a decrease in loans carrying government guarantees.
The guaranteed portion of loans decreased from $50,347,995, or 26.02% of gross loans at June 30, 2015 to $49,093,191, or 23.2% of gross loans at June 30. Loans not carrying government guarantees represent the majority of the loan growth since June 30, 2015. The increased credit exposure contributed to the increased provision for loan losses.
Noninterest income increased from $625,015 in the second quarter of 2015 to $938,921 in 2016. The increase primarily results from the recording of $315,754 in tax exempt life insurance proceeds during the quarter ended June 30.
Service charges in deposit accounts decreased from $208,321 in 2015 to $160,388 due to regulatory changes involving insufficient funds charges. Noninterest expenses increased 6.5% from $1,837,382 in the second quarter of 2015, to $1,956,297 in 2016. This increase was primarily due to an increase in salaries and employee benefits, which grew due to the opening of a new branch office in the second half of 2015.
Loan loss reserves were $3,846,517 or 1.82% of total loans as of June 30. Non-performing assets were 0.675 of total assets at June 30, compared to 0.785 on that date in 2015. At June 30, the allowance for loan loss reserves equals 90% of impaired and non-performing assets, net of government guarantees.
Total assets were $262,650,694 as of June 30, an increase of 3.8% from $253,079,571 reported as of June 30, 2015. Total deposits were $216,689,033 at quarter-end 2016, a 4.5% increase from the $207,433,069 reported at the end of the second quarter of 2015. Net loans increased to $207,918,096, or 9.5%, compared to $189,881,404, at June 30, 2015.
Net income for the six months ended June 30, was $1,915,775 or $0.46 per diluted share, compared to $1,468,370 or $0.35 per diluted share, for the same period in 2015.
