Surrey Bancorp (Pink Sheets: SRYB), the holding company for Surrey Bank & Trust, recently reported net income for the fourth quarter of 2012 more than doubled from the same period a year earlier and a more than 23 percent increase for the year when compared to 2011.

The company said that for the quarter which ended Dec. 31, net income totaled $976,399 or 23 cents per diluted share, compared with $422,530 or 10 cents per common share earned during the fourth quarter of 2011.

The increase in earnings results from a reduction in the provision for loan losses, the company said..

The provision for loan losses decreased from $676,527 in the fourth quarter of 2011 to a recapture of $309,080 for the same period in 2012.

“The decrease to the reserves in 2012 is primarily due to the improved credit quality of the loan portfolio and a reduction in loans outstanding, primarily in the fourth quarter of 2012,” the company said in a written statement. “Overall loans outstanding decreased 1.48 percent from $179,344,963 at Dec. 31, 2011 to $176,687,329 at Dec. 31, 2012. Additionally, a higher concentration of government guaranteed loans, as a percentage of total loans, had an impact on the loan loss provision. Approximately $55,100,000 of the total loans outstanding at Dec. 31, 2012, carry government guarantees which reduce the bank’s credit exposure. The guaranteed portion of these loans amounts to approximately $43,118,000, or 24.4 percent of total loans outstanding. This compares to guarantees of $38,918,000, or 21.7 percent of loans outstanding at Dec. 31, 2011.”

Net interest income increased 2.7 percent from $2,261,242 in the fourth quarter of 2011 to $2,321,194 for the same period in 2012, as deposit costs continue to fall. Non-interest income decreased slightly to $798,359, compared to $803,301 reported for the quarter ended Dec. 31, 2011.

Non-interest expenses increased 3.8 percent, from $1,725,065 in the fourth quarter of 2011, to $1,790,262 in the fourth quarter of 2012. This increase is attributable to higher payroll and professional fee costs.

For the year the company reported net income of $2,782,880, or 67 cents per share.

“This represents a 23.8 percent increase in profitability from year-end 2011, when the company reported earnings of $2,247,611, or 54 cents per fully diluted common share,” the bank said.

“The increase in net income was attributable to an increase in net interest income and to a reduction in the loan loss provision.”

Net interest income increased 5.3 percent from $8,819,997 in 2011 to $9,283,410 for the 2012 year-end as asset yields increased and the cost of deposits decreased. The provision for loan losses decreased from $743,717 in 2011 to $471,292 in 2012 due to a reduction in loans and increased loan guarantee enhancements. Non-interest income increased 1.6 percent to $2,613,627 compared to $2,571,479 reported for the year ended Dec. 31, 2011, as subsidiary insurance commission revenue increased. Non-interest expenses decreased 1.6 percent, from $7,031,362 in 2011, to $6,921,581 in 2012 absent the litigation settlement paid in 2011.

Loan loss reserves were $3,403,098 or 1.93 percent of total loans as of Dec. 31, 2012. Non-performing assets were 1.84 percent of total assets at Dec. 31, compared to 2.20 percent on that date in 2011. At Dec. 31 the allowance for loan loss reserves equaled 77 percent of impaired and non-performing assets, net of government guarantees compared to 71 percent at the end of 2011.

Total assets were $229,912,432 as of Dec. 31, 2012, an increase of 2.3 percent from $224,727,764 reported as of Dec. 31, 2011. Total deposits were $187,823,037 at year-end 2012, an increase of 2.1 percent from the $183,938,376 reported at the end of year of 2011.

Net loans decreased 1.07 percent to $173,577,565, compared to $175,446,206 as of Dec. 31, 2011.