Oct. 29. Mount Airy-based Surrey Bancorp, the holding company for Surrey Bank & Trust, reported lower earnings for the third quarter ended Sept. 30. Net income totaled $1,052,172 or $0.25 per fully diluted share, compared to $1,676,806 or $0.40 per fully diluted common share earned during the third quarter of 2019.

Total assets rose 28.3 percent to $425,396,540 as of Sept. 30.

The decrease in earnings results from a decrease in net interest income and an increase in the provision for loan losses. Net interest income decreased from $3,658,136 in the third quarter of 2019 to $3,084,814 in the third quarter of 2020. The provision for loan losses increased from a provision recapture of $131,847 in the third quarter of 2019 to a provision of $196,073 in the third quarter of 2020.

The decrease in net interest income is the result of the sudden decrease in interest rates due to the COVID-19 pandemic. Loan yields decreased from 6.10 percent in the third quarter of 2019 to 4.78 percent in the same quarter of 2020. The yield on interest earning assets decreased from 5.42 percent to 3.51 percent from the third quarter of 2019 to the third 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 carried approximately $47,330,000 of PPP loans in its loan portfolio at the end of the third quarter of 2020. These loans carry an interest rate of 1.00 percent and carry a 100 percent government guarantee. The cost of funds decreased from 0.51 percent in the third quarter of 2019 to 0.32 percent in 2020 due to general rate decreases.

The provision for loan losses increased $327,920 in the third quarter of 2020 compared to the third quarter of 2019. This increase is due to the estimated economic impact of the current pandemic.

Non-interest income remained virtually unchanged amounting to $619,965 in the third quarter of 2020 compared to $619,031 in during the same period in 2019. Non-interest expenses decreased 2.6 percent from $2,222,108 in the third quarter of 2019, compared to $2,163,334 in 2020.

Loan loss reserves were $4,714,718 or 1.67 percent of total loans as of Sept. 30. Non-performing assets were 0.11 percent of total assets on Sept. 30, compared to 0.38 percent on that date in 2019.

On Sept. 30, 2020, the allowance for loan loss reserves equaled 530 percent of impaired and non-performing assets, net of government guarantees.