Surrey Bancorp Reports Third Quarter Net Income of $785,354

MOUNT AIRY, NC--(Marketwired - October 27, 2016) - Surrey Bancorp (the "Company") (OTC PINK: SRYB), the holding company for Surrey Bank & Trust, today reported earnings for the third quarter of 2016.

For the quarter ended September 30, 2016, net income totaled $785,354 or $0.19 per fully diluted share, compared to $798,587 or $0.19 per fully diluted common share earned during the third quarter of 2015.

Net income for the three months ended September 30, 2016, is approximately 1.7 percent less than for the same period in 2015. The decrease in earnings primarily results from an increase in salaries, employee benefits and occupancy expenses associated with the opening of a branch office in Elkin, North Carolina in December of 2015. Collectively, employment and occupancy expenses increased approximately $195,000, or 18.8 percent from the third quarter of 2015 to the third quarter of 2016. Net interest income increased from $2,513,442 in the third quarter of 2015 to $2,711,787 in 2016. This increase is due to loan growth. Average loans outstanding increased 8.7 percent from the third quarter of 2015 to 2016, or approximately $16,975,000. The net interest margin increased from 4.00 percent to 4.50 percent from 2015 to 2016 due to a combination of higher assets yields and lower deposit costs. Asset yields increased from 4.44 percent in 2015 to 4.86 percent in 2016 primarily from a change in asset mix and a slight uptick in interest rates. Higher yielding loans made up 87.4 percent of average interest earning assets in the third quarter of 2016 as opposed to 78.2 percent in the third quarter of 2015. The cost of funds decreased from 0.49 percent in the third quarter of 2015 to 0.40 percent in the third quarter of 2016 as non-interest bearing deposits made up a higher percentage of average deposits. The provision for loan losses decreased slightly from a provision of $129,213 in the third quarter of 2015 to a provision of $123,910 in 2016, a $5,303 decrease. The provision decrease is partially due to the winding down of operations in the Company's sales finance subsidiary, Freedom Finance, LLC ("Freedom"), which sold its remaining loan portfolio at the end of July 2016. The provision for loan losses associated with Freedom decreased by $18,498 from the third quarter of 2015 to the same period in 2016. The Bank also experienced lower net charge offs in the third quarter of 2016 compared to 2015 further affecting the provision downward.

Noninterest income decreased from $667,364 in the third quarter of 2015 to $623,870 in 2016. Service charges on deposit accounts decreased from $193,177 in 2015 to $169,748 due to regulatory changes involving insufficient funds charges. Insurance and investment commissions were also down in Surrey Investment Services, Inc. Combined commissions decreased from $192,571 in 2015 to $160,912 in 2016. This decrease was due to a change in insurance carriers with certain commercial business and a reduction in fixed and variable annuity sales. Noninterest expenses increased 11.1 percent from $1,799,660 in the third quarter of 2015, to $1,998,910 in 2016. This increase was primarily due to cost associated with the opening of the Elkin branch office at the end of 2015.

Loan loss reserves were $3,797,948 or 1.77 percent of total loans as of September 30, 2016. Non-performing assets were 0.79 percent of total assets at September 30, 2016, compared to 0.67 percent on that date in 2015. At September 30, 2016, the allowance for loan loss reserves equals 98 percent of impaired and non-performing assets, net of government guarantees.

Total assets were $268,079,225 as of September 30, 2016, a decrease of 3.2 percent from $276,915,968 reported as of September 30, 2015. Total deposits were $221,063,810 at quarter-end 2016, a 3.9 percent decrease from the $229,949,498 reported at the end of the third quarter of 2015. Net loans increased to $211,051,726, or 8.1 percent, compared to $195,175,423, at September 30, 2015.

Net income for the nine months ended September 30, 2016, was $2,701,129 or $0.65 per diluted share, compared to $2,266,957 or $0.54 per diluted share, for the same period in 2015.

About Surrey Bancorp

Surrey Bancorp is the bank holding company for Surrey Bank & Trust (the "Bank") and is located at 145 North Renfro Street, Mount Airy, North Carolina. The Bank operates full service branch offices at 145 North Renfro Street, 1280 West Pine Street and 2050 Rockford Street in Mount Airy. Full-service branch offices are also located at 653 South Key Street in Pilot Mountain; 393 CC Camp Road, Elkin, North Carolina, and 940 Woodland Drive in Stuart, Virginia. The Bank has a Loan Production Office at 717 Main Street in North Wilkesboro, North Carolina.

Surrey Bank & Trust is engaged in the sale of insurance and provides full-service brokerage and investment services through its wholly owned subsidiary Surrey Investment Services, Inc. The insurance division, dba SB&T Insurance, is located at 199 North Renfro Street in Mount Airy. The brokerage division which operates through an association with LPL Financial, is located at 145 North Renfro Street in Mount Airy.

Surrey Bank & Trust can be found online at www.surreybank.com.

Non-GAAP Financial Measures

This report refers to the overhead efficiency ratio, which is computed by dividing non-interest expense by the sum of net interest income and non-interest income. This is a non-GAAP financial measure that we believe provides investors with important information regarding our operational efficiency. Comparison of our efficiency ratio with those of other companies may not be possible, because other companies may calculate the efficiency ratio differently. Such information is not in accordance with generally accepted accounting principles in the United States (GAAP) and should not be construed as such. Management believes such financial information is meaningful to the reader in understanding operating performance, but cautions that such information not be viewed as a substitute for GAAP. Surrey Bancorp, in referring to its net income, is referring to income under GAAP.

Forward Looking Statements

Information in this press release contains "forward-looking statements." These statements reflect management's current beliefs as to the expected outcomes of future events and are not guarantees of future performance. These statements involve certain risks, uncertainties and assumptions that are difficult to predict with regard to timing, extent, likelihood and degree of occurrence. As such, actual results and outcomes may materially differ from what may be expressed or forecast in such forward-looking statements. Factors that could cause a difference include, among others: changes in the national and local economies or market conditions; changes in interest rates, deposit levels, loan demand and asset quality, including real estate and other collateral values; changes in banking regulations and accounting principles, policies or guidelines; and the impact of competition from traditional or new sources. These and other factors that may emerge could cause decisions and actual results to differ materially from current expectations. Surrey Bancorp takes no obligation to revise, update, or clarify forward-looking statements to reflect events or conditions after the date of this press release.

¹ Annualized for all periods presented.