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SUN BANCORP INC NJ
Symbol U : SNBC
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Sun Bancorp, Inc. Reports Fourth Quarter 2012 Results

2013-01-23 17:47 ET - News Release

- Risk reduction strategies accelerate leading to a 37% reduction in NPL's during the 4th quarter as NPL / Loans falls to 3.53%(1)
- Revenue growth initiatives progressing as annual core commercial loan production increases 39% and annual Sun Home Loans loan closings increase by 246%
- Solid capital ratios after risk reduction efforts with Total Risk Based Capital Ratio of 13.7% and Tier 1 Leverage Ratio of 9.3%
- Management team enhanced with appointments of new CFO and CRO

VINELAND, N.J., Jan. 23, 2013 /PRNewswire/ -- Sun Bancorp, Inc. (NASDAQ: SNBC) reported today a net loss available to common shareholders of $25.0 million, or $0.29 per diluted share, for the quarter ended December 31, 2012, compared to a net loss available to common shareholders of $1.5 million, or $0.02 per diluted share, for the fourth quarter of 2011.

The following are key items and events that occurred during the fourth quarter of 2012:

  • As part of a continuing strategy to reduce balance sheet risk, the Company signed a definitive agreement on January 17, 2013 to sell $45.8 million of loans, having a book balance of $35.1 million, to a third-party investor for gross proceeds of $22.0 million. The transaction, which is expected to close in the first quarter of 2013, resulted in a net loss of $7.6 million after accounting for loan loss reserves, customer derivative termination costs and other expenses. As the formal approval to sell these loans occurred during 2012, the related loans were transferred to held-for-sale as of December 31, 2012 at fair value. In addition, the Company reached workout settlements with several troubled borrowers, resulting in a loss of $6.0 million.
  • Provision expense totaled $24.2 million during the fourth quarter of 2012 as compared to $1.9 million in the third quarter of 2012 and $6.8 million in the fourth quarter of 2011. The allowance for loan losses equaled $46.5 million at quarter end, a decrease of $2.5 million from September 30, 2012, and an increase of $4.8 million from December 31, 2011. The allowance for loan losses equaled 2.04% of gross loans held-for-investment and 57.8% of non-performing loans held for investment as compared to 2.12% and 40.6% and 1.82% and 38.7%, respectively, at September 30, 2012 and December 31, 2011.
  • Commercial loan production was $114 million during the fourth quarter versus $113 million in the linked quarter.  The Company continues to maintain a disciplined underwriting and pricing strategy in this uncertain economic environment. 
  • The net interest margin equaled 3.30% for the fourth quarter of 2012 versus 3.41% in the linked quarter. The current quarter margin was negatively impacted by the maturity of legacy commercial loans as well as the overall low interest rate environment.
  • Non-interest income decreased $2.8 million to $6.8 million during the fourth quarter of 2012 as compared to the linked quarter primarily due to an increase of $1.6 million in swap termination fees, of which $979 thousand was a result of liabilities assumed from the loan sale, and the remaining fees related to other problem loan workouts. Gains on the sale of mortgage loans declined by $510 thousand as the linked quarter included a $1.5 million positive mark-to-market adjustment from a fair value election on its loans held-for-sale, effective July 1, 2012.  The Company's residential mortgage operations remain strong as $236 million in residential mortgage loans were closed and $149 million sold during the fourth quarter compared to $240 million and $120 million, respectively, in the linked quarter.  The Company originated $665 million in 2012 versus $192 million in 2011.
  • Total risk-based capital was 13.73% at December 31, 2012, well above 11.50%, the regulatory required level.

"This was an impactful quarter for Sun, culminating an impactful year of successful risk reduction and revenue growth strategies," said Thomas X. Geisel, Sun's President and Chief Executive Officer. "We were able to simultaneously strengthen our balance sheet by significantly reducing classified assets to near peer levels and at the same time demonstrate our competitive advantage with meaningful commercial and mortgage loan production. In 2013, we will continue with a laser like focus on how we deliver the bank to our customers and provide value towards their financial goal achievement."

Discussion of Results:

Balance Sheet

  • Total assets were $3.22 billion at December 31, 2012, as compared to $3.18 billion at September 30, 2012 and December 31, 2011.
  • Gross loans held-for-investment were $2.27 billion at December 31, 2012, as compared to $2.31 billion at September 30, 2012 and $2.29 billion at December 31, 2011. This decrease is the result of the Company's aggressive problem loan workout strategies implemented in 2012.
  • Deposits increased by $66.4 million from the linked quarter to $2.71 billion at December 31, 2012. The increase was due to an increase in short-term time deposits.
  • Borrowings increased by $23.0 million from the linked quarter in order to fund the continued residential loan growth.

Net Interest Income and Margin

  • On a tax equivalent basis, net interest income decreased $355 thousand over the linked quarter to $24.2 million. The net interest margin decreased 11 basis points to 3.30% from 3.41% for the linked quarter, and 24 basis points as compared to the same quarter in 2011. The average yield on interest-earning assets decreased 12 basis points over the linked quarter from 3.99% to 3.87%. This decrease is due to a corresponding decline in loan yields and excess cash.  The Company held $170 million of cash as of December 31, 2012.  The commercial loan yields declined seven basis points due to lower rates on new originations combined with pay-offs of higher yielding legacy loans and residential real estate yields decreased 21 basis points due to significantly lower market rates. The margin variance from the prior year is due to the similar pressures in the current interest rate environment.

  Non-Interest Income

  • Non-interest income was $6.8 million for the quarter ended December 31, 2012, a decrease of $2.8 million from $9.6 million for the linked quarter and $11 thousand above the comparable prior year quarter's level of $6.8 million. The decrease from the linked quarter was primarily attributable to an increase of $1.6 million in swap termination fees as a result of the Company's aggressive workout strategies. Gains on the sale of mortgage loans declined $510 thousand as the linked quarter included a $1.5 million positive mark-to-market adjustment from a fair value election on its loans held-for-sale, effective July 1, 2012. Excluding mark-to-market adjustments, normalized mortgage gains were $3.2 million in the fourth quarter of 2012 versus $2.7 million in the linked quarter.  The Company also had a decrease of $424 thousand in deposit service charges from the linked quarter due to declining volumes. 

Non-Interest Expense

  • The Company incurred $31.6 million of non-interest expense in the fourth quarter of 2012, an increase of $738 thousand over the linked quarter and an increase of $4.4 million from the comparable prior year quarter. Professional fees increased by $677 thousand over the linked quarter due to additional compliance related consulting costs. Advertising costs were $576 thousand higher than the linked quarter due to ongoing deposit promotions as well as the residential mortgage growth. Reserves for unused credit commitments also increased by $280 thousand in the fourth quarter of 2012 over the linked quarter.  These increases were partially offset by a $1.4 million decline in problem loan costs as the Company has reached a more normalized run rate for problem assets. The increase in non-interest expense from the prior year period is due primarily to additional salaries and benefits expense associated with the mortgage origination expansion in 2012 as well as increased professional fees and advertising expenses. 

Asset Quality

  • The provision for loan losses for the fourth quarter of 2012 was $24.2 million, as compared to $1.9 million in the linked quarter and $6.8 million in the comparable prior year quarter. The allowance for loan losses was $46.5 million at December 31, 2012, or 2.04% of gross loans held-for-investment, as compared to an allowance for loan losses to gross loans held-for-investment ratio of 1.82% at December 31, 2011 and 2.12% at September 30, 2012.  Net charge-offs recorded in the current quarter were $26.7 million, of which $13.1 million related to the loans sale, or 1.12% of average loans, as compared to $4.2 million, or 0.18% of average loans for the linked quarter and $20.4 million, or 0.87% of average loans outstanding for the same quarter in the prior year.
  • Total non-performing assets were $100.6 million, or 4.11% of total gross loans held-for-investment, loans held-for-sale and real estate owned at December 31, 2012, as compared to $126.4 million, or 5.32% and $112.7 million, or 4.86%, respectively, at September 30, 2012 and December 31, 2011. Non-performing loans decreased to $93.2 million at December 31, 2012 as compared to $120.8 million at September 30, 2012. The December 31, 2012 balance is inclusive of $12.7 million of commercial loans held-for-sale.  This decrease is due to charge-downs from the aforementioned pending loan sale and problem loan workouts completed in the fourth quarter.

Capital

  • Stockholders' equity totaled $262.6 million at December 31, 2012 compared to $309.1 million at December 31, 2011. The Company's tangible equity to tangible assets ratio was 6.95% at December 31, 2012, as compared to 8.41% at December 31, 2011.  At December 31, 2012, the Company's total risk-based capital ratio, Tier 1 capital ratio and leverage capital ratio were approximately 13.73%, 11.83%, and 9.30%, respectively.  At December 31, 2012, Sun National Bank's total risk-based capital ratio, Tier 1 capital ratio and leverage capital ratio were approximately 13.04%, 11.78%, and 9.26%, respectively. 

Impact of Hurricane Sandy

  • The Company incurred $4.6 million impact due to Hurricane Sandy.  This is composed of $4.4 million of additional loan loss reserves and $222 thousand of repair costs for facilities. So far, we have not seen any material deterioration in our loan portfolio due to Sandy. We completed a thorough assessment and thought it would be prudent to add an additional reserve to capture the potential risk as a result of the storm. 

The Company will hold its regularly scheduled conference call on Thursday, January 24, 2013, at 11:00 a.m. (ET).  Participants may listen to the live web cast via the "Investor Relations" section of the Sun Bancorp, Inc. web site at www.sunnb.com.  Participants are advised to log on 10 minutes ahead of the scheduled start of the call.  An Internet-based replay will be available at the Web site for two weeks following the call.

Sun Bancorp, Inc. (Nasdaq: SNBC) is a $3.22 billion asset bank holding company headquartered in Vineland, New Jersey, with its executive offices located in Mt. Laurel, New Jersey. Its primary subsidiary is Sun National Bank, a full service commercial bank serving customers through more than 60 locations in New Jersey. Sun National Bank has been named one of Forbes Magazine's "Most Trustworthy Companies" for five years running.  The Bank is an Equal Housing Lender and its deposits are insured up to the legal maximum by the Federal Deposit Insurance Corporation (FDIC). For more information about Sun National Bank and Sun Bancorp, Inc., visit www.sunnb.com.  

The foregoing material contains forward-looking statements as defined in the Private Securities Litigation Reform Act of 1995, concerning the financial condition, results of operations and business of the Company.  Forward-looking statements are statements that include projections, predictions, expectations or beliefs about events or results or otherwise are not statements of historical facts, including statements related to the Company's continuing strategy to strengthen its balance sheet. Actual results and trends could differ materially from those set forth in such statements.  We caution that such statements are subject to a number of uncertainties, including those detailed in the Company's filings pursuant to the Securities Exchange Act of 1934, as amended. Therefore, readers should not place undue reliance on any forward-looking statements.  The Company does not undertake, and specifically disclaims, any obligation to publicly release the results of any revisions that may be made to any forward-looking statements to reflect the occurrence of anticipated or unanticipated events or circumstances after the date of such statements.

Non-GAAP Financial Measures

This release references tax-equivalent interest income and non-operating income and expenses. Tax-equivalent interest income is a non-GAAP financial measure. Tax-equivalent interest income assumes a 35% marginal federal tax rate for all periods. The fully taxable equivalent adjustments for the three months ended December 31, 2012 and 2011 were $210 thousand and $271 thousand, respectively. The fully taxable equivalent adjustments for the twelve months ended December 31, 2012 and 2011 were $870 thousand and $1.3 million, respectively. The fully taxable equivalent adjustment for the three months ended September 30, 2012 was $212 thousand. Non-operating income (loss) is also a non-GAAP financial measure. Non-operating income (loss) includes impairment losses recognized on available for sale securities included in earnings. There were no non-operating income (loss) items for the three months ended December 31, 2012, September 30, 2012, June 30, 2012, and December 31, 2011. Non-operating loss during the twelve months ended December 31, 2011 was $250 thousand.

(1) NPL/Loans excludes loans held-for-sale.

 



SUN BANCORP, INC. AND SUBSIDIARIES



CONSOLIDATED FINANCIAL HIGHLIGHTS (Unaudited)



(Dollars in thousands, except per share amounts)




For the Three Months Ended


For the Twelve Months Ended



December 31,


December 31,




2012


2011


2012


2011


Profitability for the period:










    Net interest income


$

23,981


$

25,729


$

97,848


$

103,528


    Provision for loan losses



24,154



6,826



57,215



74,266


    Non-interest income



6,815



6,804



29,450



13,468


    Non-interest expense



31,598



27,226



120,608



110,225


    Loss before income taxes



(24,956)



(1,519)



(50,525)



(67,495)


    Net loss



(24,956)



(1,519)



(50,491)



(67,505)


    Net loss available to common shareholders


$

(24,956)


$

(1,519)


$

(50,491)


$

(67,505)
















Financial ratios:














    Return on average assets(1) 



(3.13)

%


(0.19)

%


(1.60)

%


(2.05)

%

    Return on average equity(1)



(34.70)

%


(1.96)

%


(17.19)

%


(22.57)

%

    Return on average tangible equity(1),(2)



(40.61)

%


(2.29)

%


(20.17)

%


(26.77)

%

    Net interest margin(1)



3.30

%


3.54

%


3.43

%


3.50

%

    Efficiency ratio



102.60

%


83.69

%


94.21

%


94.21

%

    Efficiency ratio, excluding non-operating income and non-operating expense(3)



91.55

%


81.02

%


89.87

%


81.05

%















    Loss per common share:














        Basic


$

(0.29)


$

(0.02)


$

(0.59)


$

(0.88)


        Diluted 


$

(0.29)


$

(0.02)


$

(0.59)


$

(0.88)
















    Average equity to average assets



9.01

%


9.62

%


9.31

%


9.10

%











December 31,








2012

2011






At period-end:








    Total assets


$

3,224,031


$

3,183,926






    Total deposits



2,713,224



2,667,977






    Loans receivable, net of allowance for loan losses



2,228,217



2,249,455






    Loans held-for-sale(4)



123,005



23,192







    Investments



461,980



532,715







    Borrowings



70,992



31,269







    Junior subordinated debentures



92,786



92,786







    Shareholders' equity



262,596



309,083




















Credit quality and capital ratios:













    Allowance for loan losses to gross loans held-for-investment



2.04

%


1.82

%






  Non-performing loans held-for-investment to gross loans held-for-investment



3.53

%


4.69

%






    Non-performing assets to gross loans held-for-investment, loans held-for-sale and real estate owned



4.18

%


4.86

%






    Allowance for loan losses to non-performing loans held-for-investment



57.81

%


38.69

%



















Total capital (to risk-weighted assets):













        Sun Bancorp, Inc.



13.73

%


15.22

%






        Sun National Bank



13.04

%


13.39

%






Tier 1 capital (to risk-weighted assets):













        Sun Bancorp, Inc.



11.83

%


13.96

%






        Sun National Bank



11.78

%


12.13

%






Leverage ratio:













        Sun Bancorp, Inc.



9.30

%


11.09

%






        Sun National Bank



9.26

%


9.64

%



















    Book value per common share


$

3.05


$

3.61







    Tangible book value per common share


$

2.57


$

3.08







(1) Amounts for the three and twelve months ended are annualized.

(2) Return on average tangible equity is computed by dividing annualized net income for the period by average tangible equity. Average tangible equity equals average equity less average identifiable intangible assets and goodwill.

(3) Efficiency ratio, excluding non-operating income and non-operating expense, is computed by dividing non-interest expense for the period by the summation of net interest income and non-interest income. Non-interest income for the three months ended December 31, 2012 and December 31, 2011 excludes gain on sale of investment securities of $196 thousand and $(280) thousand, respectively and derivative credit adjustment of $1.8 million and $214 thousand, respectively.  Non-interest expense for the three months ended December 31, 2012 excludes $701 thousand of loan sale related costs.  Noninterest income for the twelve months ended December 31, 2012 and December 31, 2011 excludes gain on sale of investment securities of $234 thousand and $(1.6) million, respectively and derivative credit adjustment of $2.3 million and $8.7 million, respectively Non interest income for the twelve months ended December 31, 2011 excludes net impairment losses on available for sale securities of $250 thousand. .  Non-interest expense for the twelve months ended December 31, 2012 and December 31, 2011 excludes $701 thousand and $2.3 million of loan sale related costs. 

(4) Loans held-for-sale includes $101.0 million of residential real estate loans and $22.0 million of commercial real estate loans measured at fair value at December 31, 2012.  The December 31, 2011 balance includes $23.2 million of residential real estate loans measured at cost.


 

SUN BANCORP, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION (Unaudited)

(Dollars in thousands, except par value amounts)


December 31,

2012


December 31, 2011


ASSETS





Cash and due from banks

$

77,564


$

68,773


Interest-earning bank balances


92,052



51,049


Cash and cash equivalents


169,616



119,822


Investment securities available for sale (amortized cost of $439,488 and $514,488 at December 31, 2012 and December 31, 2011, respectively)


443,182



515,545


Investment securities held to maturity (estimated fair value of $960 and $1,413 at December 31, 2012 and December 31, 2011, respectively)


912



1,344


Loans receivable (net of allowance for loan losses of $46,482 and $41,667 at December 31, 2012 and December 31, 2011, respectively)


2,228,217



2,249,455


  Loans held-for-sale, at cost


-



23,192


Loans held-for-sale, at fair value


123,005



-


Restricted equity investments, at cost


17,886



15,826


Bank properties and equipment, net


50,805



54,756


Real estate owned


7,473



5,020


Accrued interest receivable


8,054



8,912


Goodwill


38,188



38,188


Intangible assets


3,262



6,947


Bank owned life insurance (BOLI)


76,858



74,871


Other assets


56,573



70,048


Total assets

$

3,224,031


$

3,183,926









LIABILITIES AND SHAREHOLDERS' EQUITY







Liabilities:







Deposits

$

2,713,224


$

2,667,977


Securities sold under agreements to repurchase – customers


1,968



5,668


Advances from the Federal Home Loan Bank of New York (FHLBNY)


61,415



2,733


Securities sold under agreements to repurchase – FHLBNY


-



15,000


Obligations under capital lease


7,609



7,868


Junior subordinated debentures


92,786



92,786


Deferred taxes, net


1,509



432


Other liabilities


82,924



82,379


Total liabilities


2,961,435



2,874,843









Shareholders' equity:







Preferred stock, $1 par value, 1,000,000 shares authorized; none issued


-



-


Common stock, $1 par value, 100,000,000 shares authorized; 88,290,735 shares issued and 86,184,012 shares outstanding at December 31, 2012; 87,825,038 shares issued and 85,718,315 shares outstanding at December 31, 2011


88,301



87,825


Additional paid-in capital


506,537



504,508


Retained deficit


(308,010)



(257,520)


Accumulated other comprehensive income


2,186



625


Deferred compensation plan trust


(256)



(193)


Treasury stock at cost, 2,106,723 shares at  December 31, 2012 and December 31, 2011


(26,162)



(26,162)


Total shareholders' equity


262,596



309,083


Total liabilities and shareholders' equity

$

3,224,031


$

3,183,926



 

SUN BANCORP, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF OPERATIONS (Unaudited)

(Dollars in thousands, except share and per share amounts)



For the Three Months

Ended December 31,



For the Twelve Months
Ended December 31,



2012



2011



2012



2011

INTEREST INCOME












Interest and fees on loans

$

25,670


$

27,678


$

103,707


$

112,793

Interest on taxable investment securities


1,860



2,421



9,138



10,507

Interest on non-taxable investment securities


390



503



1,618



2,487

Dividends on restricted equity investments


235



214



970



893

Total interest income


28,155



30,816



115,433



126,680

INTEREST EXPENSE












Interest on deposits


3,143



4,041



13,553



18,737

Interest on funds borrowed


460



351



1,438



1,418

Interest on junior subordinated debentures


571



695



2,594



2,997

Total interest expense


4,174



5,087



17,585



23,152

Net interest income


23,981



25,729



97,848



103,528

PROVISION FOR LOAN LOSSES


24,154



6,826



57,215



74,266

Net Interest (loss) income after provision for loan losses


(173)



18,903



40,633



29,262

NON-INTEREST INCOME












Service charges on deposit accounts


2,414



2,799



10,660



10,889

Other service charges


72



71



294



330

Gain on sale of loans


3,694



906



10,479



3,247

Impairment losses on available for sale securities


-



-



-



(250)

Gain (loss) on sale of investment securities


(196)



447



234



1,855

Investment products income


606



453



2,296



2,913

BOLI income


488



1,309



1,986



2,964

Derivative credit valuation adjustment


(1,750)



(214)



(2,275)



(12,538)

Other


1,487



1,033



5,776



4,058

Total non-interest income


6,815



6,804



29,450



13,468

NON-INTEREST EXPENSE












Salaries and employee benefits


15,845



13,011



62,500



52,501

Occupancy expense


3,416



3,643



13,011



13,373

Equipment expense


2,005



1,858



7,399



7,342

Amortization of intangible assets


921



921



3,685



3,685

Data processing expense


1,138



1,118



4,384



4,352

Professional fees


1,389



525



3,459



3,563

Insurance expenses


1,506



1,433



5,824



6,186

Advertising expense


1,040



664



2,809



2,946

Problem loan expense


776



1,866



5,681



8,342

Real estate owned expense, net


1,008



108



2,358



1,186

Office supplies expense


298



323



1,247



1,307

Other


2,256



1,756



8,251



5,442

Total non-interest expense


31,598



27,226



120,608



110,225

LOSS BEFORE INCOME TAXES


(24,956)



(1,519)



(50,525)



(67,495)

INCOME TAX (BENEFIT) EXPENSE


-



-



(34)



10

NET LOSS AVAILABLE TO COMMON SHAREHOLDERS

$

(24,956)


$

(1,519)


$

(50,491)


$

(67,505)













Basic loss per share

$

(0.29)


$

(0.02)


$

(0.59)


$

(0.88)

Diluted loss per share

$

(0.29)


$

(0.02)


$

(0.59)


$

(0.88)

Weighted average shares – basic

86,082,669


85,587,878


85,937,110


76,653,990

Weighted average shares - diluted

86,082,669


85,587,878


85,937,110


76,653,990


 


 

SUN BANCORP, INC. AND SUBSIDIARIES

HISTORICAL TRENDS IN QUARTERLY FINANCIAL DATA (Unaudited)

(Dollars in thousands)


2012


2012


2012


2012


2011


Q4


Q3


Q2


Q1


Q4

Balance sheet at quarter end: 










Cash and cash equivalents

$

169,616


$

83,854


$

115,891


$

87,553


$

119,822

Investment securities


461,980



527,034



549,849



576,457



532,715

Loans held-for-investment: 















        Commercial and industrial


1,726,073



1,802,060



1,794,830



1,820,054



1,878,026

        Home equity 


207,814



212,911



217,768



219,926



224,517

        Second mortgage 


30,842



32,610



36,429



38,815



41,470

        Residential real estate 


271,385



224,346



153,373



109,807



100,438

        Other 


38,585



39,069



42,486



36,952



46,671

            Total gross loans held-for-investment


2,274,699



2,310,996



2,244,886



2,225,554



2,291,122

Allowance for loan losses 


(46,482)



(49,016)



(51,394)



(52,127)



(41,667)

            Net loans held-for-investment


2,228,217



2,261,980



2,193,492



2,173,427



2,249,455

   Loans held-for-sale


123,005



60,676



24,672



25,034



23,192

    Goodwill 


38,188



38,188



38,188



38,188



38,188

    Intangible assets


3,262



4,183



5,104



6,025



6,947

    Total assets 


3,224,031



3,180,263



3,133,487



3,113,269



3,183,926

    Total deposits


2,713,224



2,646,807



2,608,034



2,631,652



2,667,977

   Federal funds purchased


-



30,000



-



-



-

    Securities sold under agreements to repurchase – customers


1,968



3,587



5,454



5,870



5,668

    Advances from FHLBNY


61,415



16,749



22,080



2,408



2,733

    Securities sold under agreements to repurchase – FHLBNY


-



20,000



15,000



15,000



15,000

    Obligations under capital lease


7,609



7,675



7,740



7,805



7,868

    Junior subordinated debentures


92,786



92,786



92,786



92,786



92,786

    Total shareholders' equity


262,596



287,480



284,768



283,163



309,083

Quarterly average balance sheet: 















    Loans(1)















        Commercial and industrial 

$

1,788,347


$

1,805,623


$

1,815,704


$

1,849,216


$

1,910,635

        Home equity


210,085



215,542



218,910



220,411



226,345

        Second mortgage 


32,442



35,816



38,545



41,346



44,600

        Residential real estate


319,427



230,259



155,479



123,567



111,514

        Other


32,444



33,658



34,765



41,733



46,248

            Total gross loans 


2,382,745



2,320,898



2,263,403



2,276,273



2,339,342

    Securities and other interest-earning assets 


545,781



555,846



583,788



580,349



602,485

    Total interest-earning assets 


2,928,526



2,876,744



2,847,191



2,856,622



2,941,827

    Total assets 


3,193,607



3,153,668



3,116,627



3,154,762



3,229,699

    Non-interest-bearing demand deposits 


511,813



504,936



493,707



487,088



536,558

    Total deposits 


2,660,405



2,642,048



2,604,083



2,621,736



2,706,772

    Total interest-bearing liabilities 


2,318,794



2,279,177



2,259,370



2,265,830



2,294,786

    Total shareholders' equity 


287,698



289,129



285,667



312,281



310,786

Capital and credit quality measures:















Total capital (to risk-weighted assets) (2):















        Sun Bancorp, Inc.


13.73%



14.58%



14.61%



14.49%



15.22%

        Sun National Bank


13.04%



13.88%



13.90%



13.77%



13.39%

    Tier 1 capital (to risk-weighted assets) (2):















        Sun Bancorp, Inc.


11.83%



13.00%



13.00%



12.86%



13.96%

        Sun National Bank


11.78%



12.62%



12.64%



12.51%



12.13%

    Leverage ratio:















        Sun Bancorp, Inc.


9.30%



10.44%



10.45%



10.21%



11.09%

        Sun National Bank


9.26%



10.11%



10.15%



9.93%



9.64%
















    Average equity to average assets


9.01%



9.17%



9.17%



9.91%



9.62%

    Allowance for loan losses to total gross loans held-for-investment 


 

2.04%



 

2.12%



 

2.29%



 

2.34%



 

1.82%

  Non-performing loans held-for-investment to gross loans held-for-investment


3.53%



5.23%



4.63%



5.15%



4.69%

    Non-performing assets to gross loans held-for-investment, loans held-for-sale and real estate owned


4.18%



5.32%



4.84%



5.27%



4.86%

    Allowance for loan losses to non-performing loans held-for-investment


 

57.81%



 

40.56%



 

49.44%



 

45.52%



 

38.69%
















Other data:















Net charge-offs


(26,690)



(4,246)



(1,243)



(20,223)



(20,386)

Non-performing assets:















            Non-accrual loans

$

60,528


$

95,383


$

79,696


$

87,847


$

89,656

        Non-accrual loans held-for-sale


10,240



-



-



-



-

            Troubled debt restructurings, non-accrual


18,244



25,454



24,256



26,674



17,875

        Troubled debt restructurings, held-for-sale


2,499



-



-



-



-

            Loans past due 90 days and accruing


1,638



-



-



74



154

            Real estate owned, net 


7,473



5,513



6,116



4,165



5,020

                Total non-performing assets


100,622



126,350



110,068



118,760



112,705

(1)     Average balances include non-performing loans and loans held-for-sale

(2)     December 31, 2012 capital ratios are estimated, subject to regulatory filings.


 


SUN BANCORP, INC. AND SUBSIDIARIES

HISTORICAL TRENDS IN QUARTERLY FINANCIAL DATA (Unaudited)

(Dollars in thousands, except share and per share amounts)


2012


2012


2012


2012


2011


Q4


Q3


Q2


Q1


Q4

Profitability for the quarter:










Tax-equivalent interest income

$

28,367


$

28,681


$

29,619


$

29,641


$

31,087

Interest expense


4,174



4,135



4,519



4,758



5,087

Tax-equivalent net interest income


24,191



24,546



25,098



24,883



26,000

Tax-equivalent adjustment


212



212



217



233



271

Provision for loan losses


24,154



1,868



510



30,683



6,826

Non-interest income excluding net impairment losses on available for sale securities


6,815



9,588



7,527



5,519



6,804

Non-interest expense excluding amortization of intangible assets


30,677



29,938



29,666



26,643



26,305

Amortization of intangible assets


921



922



921



921



921

(Loss) income before income taxes


(24,956)



1,194



1,313



(28,078)



(1,519)

Income tax benefit





(34)



-



-



-

Net (loss) income


(24,956)



1,228



1,313



(28,078)



(1,519)

Net (loss) income available to common shareholders

$

 

(24,956)


$

 

1,228


$

 

1,313


$

 

(28,078)


$

 

(1,519)

Financial ratios:















Return on average assets (1)


(3.13)

%


0.16%



0.17%



(3.56)%



(0.19)%

Return on average equity (1)


(34.70)

%


1.70%



1.84%



(35.97)%



(1.96)%

Return on average tangible equity (1),(2)


(40.61)

%


1.99%



2.17%



(41.97)%



(2.29)%

Net interest margin (1)


3.30

%


3.41%



3.53%



3.48%



3.54%

Efficiency ratio


102.60

%


90.97%



94.38%



91.37%



83.69%

Per share data:















(Loss) income per common share:















Basic

$

(0.29)


$

0.01


$

0.02


$

(0.34)


$

(0.02)

Diluted

$

(0.29)


$

0.01


$

0.02


$

(0.34)


$

(0.02)

Book value

$

3.05


$

3.34


$

3.31


$

3.30


$

3.61

Tangible book value

$

2.57


$

2.85


$

2.81


$

2.78


$

3.08

Average basic shares

86,082,669


86,001,929


85,884,671


85,776,858


85,587,878

Average diluted shares

86,082,669


86,047,655


85,916,421


85,776,858


85,587,878

Operating non-interest income:















Service charges on deposit accounts

$

2,414


$

2,848


$

2,730


$

2,668


$

2,799

Other service charges


72



69



80



73



71

Gain on sale of loans


3,694



4,204



1,865



716



906

Net gain on sale of available for sale securities


(196)



-



430



-



280

Investment products income


606



510



748



432



453

BOLI income


488



489



492



516



1,309

Derivative credit valuation adjustment


(1,750)



(198)



(13)



(314)



(214)

Other income


1,487



1,666



1,195



1,428



1,200

        Total non-interest income

$

6,815


$

9,588


$

7,527


$

5,519


$

6,804

Operating non-interest expense:















 Salaries and employee benefits

$

15,845


$

16,128


$

15,756


$

14,771


$

13,011

    Occupancy expense


3,416



3,275



3,271



3,049



3,643

    Equipment expense


2,005



1,866



1,763



1,765



1,858

    Amortization of intangible assets


921



922



921



921



921

    Data processing expense


1,138



1,084



1,106



1,056



1,118

    Professional fees


1,389



713



833



524



525

    Insurance expense


1,506



1,375



1,464



1,479



1,433

    Advertising expense


1,040



464



1,008



297



664

    Problem loan costs


776



2,154



1,274



1,477



1,866

    Real estate owned expense, net


1,008



779



490



81



108

    Office supplies expense


298



302



328



319



323

    Other expense


2,256



1,798



2,373



1,825



1,756

       Total non-interest expense

$

31,598


$

30,860


$

30,587


$

27,564


$

27,226

(1)     Amounts are annualized.

(2)     Return on average tangible equity is computed by dividing annualized net income for the period by average tangible equity. Average tangible equals average equity less average identifiable intangible assets and goodwill.


 

SUN BANCORP, INC. AND SUBSIDIARIES



AVERAGE BALANCE SHEETS (Unaudited)


(Dollars in thousands)








 For the Three Months Ended December 31,




2012



2011




Average


Income/


Yield/



Average


Income/


Yield/




Balance


Expense


Cost



Balance


Expense


Cost



Interest-earning assets:















Loans receivable (1),(2):















Commercial and industrial

$

1,788,347


$

19,628



4.39

%


$

1,910,635


$

22,542



4.72

%


Home equity


210,085



2,055



3.91




226,345



2,348



4.15



Second mortgage


32,442



470



5.79




44,600



656



5.88



Residential real estate


319,427



2,959



3.71




111,514



1,338



4.80



Other


32,444



559



6.89




46,248



794



6.87



Total loans receivable


2,382,745



25,671



4.31




2,339,342



27,678



4.73



Investment securities(3)


507,158



2,672



2.11




548,355



3,375



2.46



Interest-earning bank balances


38,623



24



0.25




54,130



34



0.25



Total interest-earning assets


2,928,526



28,367



3.87




2,941,827



31,087



4.23



Non-interest earning assets:





















  Cash and due from banks


72,129










73,863









  Bank properties and equipment, net


51,515










55,264









  Goodwill and intangible assets, net


41,902










45,586









  Other assets


99,535










113,159









Total non-interest-earning assets


265,081










287,872









Total assets

$

3,193,607









$

3,229,699






























Interest-bearing liabilities:





















Interest-bearing deposit accounts:





















Interest-bearing demand deposits

$

1,224,254


$

1,178



0.38

%


$

1,271,991


$

1,435



0.45

%


Savings deposits


263,949



228



0.35




265,115



285



0.43



Time deposits


660,389



1,737



1.05




633,108



2,321



1.47



Total interest-bearing deposit accounts


2,148,592



3,143



0.59




2,170,214



4,041



0.74



Short-term borrowings:





















Securities sold under agreements to repurchase - customers


3,250



2



0.25




6,047



1



0.07



Long-term borrowings:





















FHLBNY advances (4)


66,527



332



2.00




17,842



219



4.91



Obligations under capital lease


7,639



127



6.65




7,897



131



6.64



Junior subordinated debentures


92,786



572



2.47




92,786



695



3.00



Total borrowings


170,202



1,033



2.43




124,572



1,046



3.36



Total interest-bearing liabilities


2,318,794



4,176



0.72




2,294,786



5,087



0.89



Non-interest bearing liabilities:





















  Non-interest-bearing demand deposits


511,813










536,558









  Other liabilities


75,302










87,569









Total non-interest bearing liabilities


587,115










624,127









Total liabilities


2,905,909










2,918,913









Shareholders' equity 


287,698










310,786









Total liabilities and shareholders' equity

$

3,193,607









$

3,229,699






























Net interest income




$

24,191









$

26,000






Interest rate spread (5)








3.15

%









3.34

%


Net interest margin (6)








3.30

%









3.54

%


Ratio of average interest-earning assets to average interest-bearing liabilities








126.30

%









128.20

%





(1)  Average balances include non-accrual loans and loans held-for-sale.



(2)  Loan fees are included in interest income and the amount is not material for this analysis.