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COVID-19, PPP loans affect Surrey net

July 23. Surrey Bancorp, holding company for Surrey Bank & Trust, today reported second quarter net income of $971,563 or $0.23 per fully diluted share, compared to $1,165,651 or $0.28 per fully diluted common share earned during the second quarter of 2019.

Net interest income decreased from $3,338,262 in the second quarter of 2019 to $2,877,332 in the second quarter of 2020. The decrease in net interest income is the result of a sudden decrease in interest rates due to the COVID-19 pandemic.

Average loans outstanding in the second quarter of 2020 amounted to $268,196,488 compared to $242,438,661 in the second quarter of 2019. Loan yields decreased from 5.61 percent in the second quarter of 2019 to 4.72 percent in the same quarter of 2020. The yield on interest earning assets decreased from 5.05 percent to 3.57 percent from the second quarter of 2019 to the second quarter of 2020.

In addition to the overall decrease in interest rates, lower yields were affected by the bank’s participation in the Small Business Administration’s Paycheck Protection Plan (PPP). The Bank funded approximately $47,369,000 of PPP loans in the second quarter of 2020. These loans carry an interest rate of 1 percent and carry a 100 percent government guarantee. The cost of funds decreased from 0.49 percent in the second quarter of 2019 to 0.37 percent in 2020 due to general rate decreases.

The provision for loan losses increased from $146,685 in the second quarter of 2019 to $260,051 in 2020. This increase is due to the estimated economic impact of the current pandemic.

Non-interest income increased from $623,511 in the second quarter of 2019 to $667,751 in 2020. Increases in fees on mortgage loans delivered to correspondents and insurance commissions offset the loss of revenue from service charges on deposit accounts. Noninterest expenses decreased 10.9 percent from $2,290,837 in the second quarter of 2019, to $2,040,969 in 2020.

This decrease was primarily due to decreases in salaries and benefits, data processing fees and professional fees. Salaries expense allocated to the deferral of loan origination cost, primarily in the production of PPP loans, accounted for the decrease.

Loan loss reserves were $4,545,010 or 1.63 percent of total loans as of June 30, 2020. Non-performing assets were 0.10 percent of total assets at June 30, 2020, compared to 1.41 percent on that date in 2019. At June 30, 2020, the allowance for loan loss reserves equals 465 percent of impaired and non-performing assets, net of government guarantees.

Total assets were $403,514,398 as of June 30, 2020, an increase of 27.9 percent from $315,430,610 reported as of June 30, 2019. Total deposits were $347,135,297 at quarter-end 2020, a 31.6 percent increase from the $263,758,257 reported at the end of the second quarter of 2019. Net loans increased to $275,656,373, or 14.0 percent, compared to $241,731,085, at June 30, 2019.

Net income for the six months ended June 30, 2020, was $2,027,575 or $0.49 per diluted share, compared to $2,107,415 or $0.51 per diluted share, for the same period in 2019.

Surrey Bancorp, the bank holding company for Surrey Bank & Trust, is located at 145 North Renfro St. in Mount Airy.

 

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