Surrey Bancorp, the holding company for Surrey Bank & Trust, this week reported earnings for the second quarter of 2012 were down by more than 50 percent from the same period a year ago.

For the quarter ended June 30, net income totaled $367,581 or 9 cents per fully diluted share, compared with $711,177 or 19 cents per fully diluted common share earned during the second quarter of 2011.

Earnings for the three months ended June 30 are 48.3 percent lower than for the same period in 2011.

“The decrease results from an increase in the provision for loan losses,” the company said in a written statement. “The provision increased from a recapture of $279,825 in the second quarter of 2011 to a provision of $671,770 in 2012. This increase is due to an increase in net loan charge-offs during the second quarter of 2012 compared to the second quarter of 2011.

“Net loan charge offs in the second quarter of 2012 amounted to $771,324 compared to net recoveries of $99,278 in 2011, a difference of $870,602.”

The bank reported that net interest income increased from $2,118,802 in the second quarter of 2011 to $2,294,168 in 2012.

“A reduction in the cost of deposits from the second quarter of 2011 to 2012 contributed to the margin improvement,” the bank said. “Asset yields increased from 4.97 percent to 5.27 percent from 2011 to 2012 due to the change in earning asset mix from lower yielding deposits in other banks to higher yielding loans. The cost of funds continued to decrease from 1.14 percent in the second quarter of 2011 to 0.89 percent in the second quarter of 2012. Non-interest income remained relatively flat decreasing 0.7 percent in 2012. Non-interest expenses decreased 9.9 percent from $1,802,453 in the second quarter of 2011, to $1,623,208 in 2012. This decrease is primarily attributable to decreased costs associated with foreclosed assets. Foreclosed asset expense decreased from $120,908 in the second quarter of 2011 to a net income of $936 in 2012.”

Loan loss reserves were $3,802,204 or 2.12 percent of total loans as of June 30, according to the company. Non-performing assets were 1.9 percent of total assets at June 30, compared to 2.2 percent on that date in 2011. At June 30 the allowance for loan loss reserves equals 90 percent of impaired and non-performing assets, net of government guarantees.

Total assets were $220,164,691 as of June 30, a decrease of 3.6 percent from $228,344,483 reported as of June 30, 2011. Total deposits were $178,640,380 at quarter-end 2012, a 4.8 percent decrease from the $187,550,998 reported at the end of the second quarter of 2011. Net loans increased 1.8 percent to $175,177,109, compared to $172,005,516, at June 30, 2011.

Net income for the six months ended June 30, was $1,031,638 or 25 cents per diluted share, compared to $1,263,368 or 33 per cents diluted share, for the same period in 2011.