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Sun Bancorp, Inc. Reports Third Quarter 2012 Results

Oct 24, 2012

VINELAND, N.J., Oct. 24, 2012 /PRNewswire/ -- Sun Bancorp, Inc. (NASDAQ: SNBC) reported today net income available to common shareholders of $1.2 million, or $0.01 per diluted share, for the quarter ended September 30, 2012, compared to net income available to common shareholders of $2.7 million, or $0.03 per diluted share, for the third quarter of 2011.

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

  • Provision expense totaled $1.9 million as compared to $510 thousand in the second quarter of 2012. The allowance for loan losses equaled $49.0 million at quarter end, a decrease of $2.4 million from June 30, 2012, and an increase of $7.3 million from December 31, 2011. The allowance for loan losses equaled 2.12% of gross loans held for investment and 40.6% of non-performing loans as compared to 2.29% and 49.4% and 1.82% and 38.7%, respectively, at June 30, 2012 and December 31, 2011.
  • Commercial loan production remained strong at $113 million during the third quarter versus $65 million in the linked quarter as the Company continues to originate strong credits for the portfolio.
  • The net interest margin equaled 3.41% versus 3.53% in the linked quarter. The current quarter margin was negatively impacted by $507 thousand of interest reversals as well as a decline in commercial loan yields. The interest reversals were due primarily to approximately $24 million in loan balances for two relationships which were moved to non-accrual status.  Although these two relationships were current at September 30, 2012 and are well secured, the Company elected to designate these loans as non-accrual because certain agreed upon financial metrics were not met. Excluding these two credits, the Company continued to experience reductions in the portfolio resulting from its ongoing efforts to manage the workout portfolio.
  • Non-interest income increased $2.1 million to $9.6 million as compared to the linked quarter primarily due to an increase of $2.3 million in gains on the sale of mortgage loans. The Company's residential mortgage platform has continued its strong growth as $240 million in residential mortgage loans were recorded and $120 million sold during the third quarter as compared to $139 million and $86 million, respectively, in the linked quarter.
  • Total risk-based capital was 14.30% at September 30, 2012, well above the regulatory required level.

"Our parallel efforts to strengthen and grow the company continued through the third quarter of this year," said Thomas X. Geisel, Sun's President and Chief Executive Officer.  "We are encouraged by the growth of our residential mortgage platform, and have demonstrated our competitive advantage with strong commercial loan production and a robust pipeline despite the difficult economic environment.  We will continue to focus our efforts on asset resolution, business growth and loan origination as we advance our corporate strategy for the balance of 2012."

Discussion of Results:

Balance Sheet

  • Total assets were $3.18 billion at September 30, 2012 and December 31, 2011 and $3.24 billion at September 30, 2011. 
  • Gross loans held-for-investment were $2.31 billion at September 30, 2012, as compared to $2.29 billion at December 31, 2011 and $2.30 billion at September 30, 2011. This increase is the result of growth in the residential mortgage portfolio.
  • Deposits increased by $38.8 million from the linked quarter to $2.65 billion at September 30, 2012.  The increase was due to seasonal public funds activity.
  • Borrowings increased by $27.7 million from the linked quarter in order to fund the residential loan growth during the period.

Net Interest Income and Margin

  • On a tax equivalent basis, net interest income decreased $552 thousand over the linked quarter to $24.5 million. The net interest margin decreased 12 basis points to 3.41% from 3.53% for the linked quarter, and 20 basis points as compared to the same prior year quarter. The average yield on interest-earning assets decreased 17 basis points over the linked quarter from 4.16% to 3.99%. This decrease is due to $547 thousand of interest reversals, primarily related to two credits, recorded during the quarter as well as declining commercial loan yields resulting from legacy loans maturing and/or re-setting at lower rates. The average cost of interest-bearing liabilities decreased seven basis points to 0.73% as interest-bearing deposit costs declined by four basis points and trust preferred debt rates re-set at lower levels.  The margin variance from the prior year is due to the continuing pressures in the current interest rate environment.

Non-Interest Income

  • Non-interest income was $9.6 million for the quarter ended September 30, 2012, an increase of $2.1 million from the linked quarter of $7.5 million and $3.8 million above the comparable prior year quarter of $5.8 million. The increase from the linked quarter was primarily attributable to an increase of $2.3 million in gains on the sale of mortgage loans. Included in this increase is a $1.5 million positive mark-to-market adjustment as the Company elected the fair value option on its loans held-for-sale, effective July 1, 2012. The Company also recognized $630 thousand of net gains on forward commitments and interest rate lock commitments within its residential mortgage portfolio.  These increases were partially offset by a decrease of $430 thousand in gains on the sale of investment securities from the prior quarter.  In addition, there was a decrease of $238 thousand from the linked quarter in income from investment services.  The increase from the prior year period is due to an increase of $3.5 million in mortgage gains and a prior year derivative credit valuation loss of $309 thousand. 

Non-Interest Expense

  • The Company incurred $30.9 million of non-interest expense in the third quarter of 2012, an increase of $273 thousand over the linked quarter and an increase of $3.9 million from the comparable prior year quarter. Problem loan costs increased by $880 thousand due to $1.3 million in real estate tax expenses recognized on one non-performing relationship. Excluding this item, the normalized run rate for problem loan costs continues to decline. Salaries and benefits increased $372 thousand due to increased mortgage production. These items were mostly offset by a $544 thousand decline in advertising expense due to prior period Boomerang campaign expenses as well as a $455 thousand decrease in mortgage recourse expense. The increase in non-interest expense from the prior year period is due primarily to additional salaries and benefits expense associated with the mortgage expansion in 2012.

Asset Quality

  • The provision for loan losses for the third quarter was $1.9 million, as compared to $510 thousand in the linked quarter and $2.3 million in the comparable prior year quarter. The allowance for loan losses was $49.0 million at September 30, 2012, or 2.12% of gross loans held-for-investment, as compared to the allowance for loan losses to gross loans held-for-investment of 1.82% at December 31, 2011 and 2.39% at September 30, 2011.  Net charge-offs recorded in the current quarter were $4.2 million, or 0.18% of average loans, as compared to $1.2 million, or 0.06% of average loans for the linked quarter and $5.8 million, or 0.25% of average loans outstanding for the comparable prior year quarter.
  • Total non-performing assets were $126.4 million, or 5.32% of total gross loans held-for-investment, loans held-for-sale and real estate owned at September 30, 2012, as compared to $110.1 million, or 4.84% and $140.8 million, or 6.04%, respectively, at June 30, 2012 and September 30, 2011. Non-performing loans increased to $120.8 million at September 30, 2012 as compared to $104.0 million at June 30, 2012. This increase is due primarily to the aforementioned transfer of two credit relationships in the aggregate amount of $24 million into non-performing status at September 30, 2012; partially offset by $6.9 million in net paydowns out of the category.

Capital

  • Stockholders' equity totaled $287.5 million at September 30, 2012 compared to $309.1 million at December 31, 2011. The Company's tangible equity to tangible assets ratio was 7.81% at September 30, 2012, as compared to 8.41% at December 31, 2011.  At September 30, 2012, the Company's total risk-based capital ratio, Tier 1 capital ratio and leverage capital ratio were approximately 14.30%, 12.73%, and 10.43%, respectively.  At September 30, 2012, Sun National Bank's total risk-based capital ratio, Tier 1 capital ratio and leverage capital ratio were approximately 13.63%, 12.37%, and 10.12%, respectively. 

The Company will hold its regularly scheduled conference call on Thursday, October 25, 2012, at 11:00 a.m. (ET).  Participants may listen to the live webcast via the "Investor Relations" section of the Sun Bancorp, Inc. website 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 $3.18 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 was named one of Forbes magazine's "Most Trustworthy Companies" for five consecutive years. 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 concerning the financial condition, results of operations and business of the Company.  We caution that such statements are subject to a number of uncertainties and actual results could differ materially, and, 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 September 30, 2012 and 2011 were $212 thousand and $292 thousand, respectively. The fully taxable equivalent adjustments for the nine months ended September 30, 2012 and 2011 were $661 thousand and $1.1 million, respectively. The fully taxable equivalent adjustment for the three months ended June 30, 2012 was $217 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 September 30, 2012, June 30, 2012, March 31, 2012, December 31, 2011, and September 30, 2011. Non-operating loss during the nine months ended September 30, 2011 was $250 thousand.

 

SUN BANCORP, INC. AND SUBSIDIARIES


FINANCIAL HIGHLIGHTS (Unaudited)


(Dollars in thousands, except per share amounts)





For the Three Months Ended


For the Nine Months Ended



September 30,


September 30,




2012


2011


2012


2011


Profitability for the period:










    Net interest income


$

24,334


$

26,181


$

73,867


$

77,799


    Provision for loan losses



1,868



2,321



33,061



67,440


    Non-interest income



9,588



5,770



22.635



6,664


    Non-interest expense



30,860



26,973



89,010



82,999


    Income (loss) before income taxes



1,194



2,657



(25,569)



(65,976)


    Net income (loss)



1,228



2,680



(25,535)



(65,986)


    Net income (loss) available to common shareholders


$

1,228


$

2,680


$

(25,535)


$

(65,986)
















Financial ratios:














    Return on average assets(1) 



0.16

%


0.33

%


(1.08)

%


(2.66)

%

    Return on average equity(1)



1.70

%


3.48

%


(11,52)

%


(29.80)

%

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



1.99

%


4.10

%


(13.51)

%


(35.51)

%

    Net interest margin(1)



3.41

%


3.61

%


3.47

%


3.49

%

    Efficiency ratio



90.97

%


84.42

%


92.24

%


98.27

%

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



90.97

%


84.42

%


92.24

%


97.98

%















    Earnings (loss) per common share:














        Basic


$

0.01


$

0.03


$

(0.30)


$

(0.90)


        Diluted 


$

0.01


$

0.03


$

(0.30)


$

(0.90)
















    Average equity to

average assets



9.17

%


9.52

%


9.41

%


8.93

%



September 30,


  December 31,




2012

2011


2011


At period-end:






    Total assets


$

3,180,535


$

3,236,219


$

3,183,916


    Total deposits



2,646,807



2,727,650



2,667,977


    Loans receivable, net of allowance for loan losses



2,261,980



2,251,176


2,249,455


    Loans held-for-sale(4)



60,676



20,868



23,192


    Investments



527,034



557,380



532,715


    Borrowings



78,011



32,010



31,269


    Junior subordinated debentures



92,786



92,786



92,786


    Shareholders' equity



287,480



308,055



309,083













Credit quality and capital ratios:











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



2.12

%


2.39

%


1.82

%

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



5.32

%


6.04

%


4.86

%

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



40.56

%


42.23

%


38.69

%












Total capital (to risk-weighted assets):











        Sun Bancorp, Inc.



14.30

%


14.85

%


15.22

%

        Sun National Bank



13.63

%


13.07

%


13.39

%

Tier 1 capital (to risk-weighted assets):











        Sun Bancorp, Inc.



12.73

%


13.59

%


13.96

%

        Sun National Bank



12.37

%


11.81

%


12.13

%

Leverage ratio:











        Sun Bancorp, Inc.



10.43

%


11.08

%


11.09

%

        Sun National Bank



10.12

%


9.64

%


9.64

%












    Book value per common share


$

3.34


$

3.60


$

3.61


    Tangible book value per common share


$

2.85


$

3.06


$

3.08


(1) Amounts for the three and nine 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 nine months ended September 30, 2011 excludes net impairment losses on available for sale securities of $250 thousand.

(4) Amount at September 30, 2011 includes $5.2 million of commercial real estate loans marked at fair value.
























 

SUN BANCORP, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION (Unaudited)

(Dollars in thousands, except par value amounts)



September 30,

2012


December 31, 2011

ASSETS




Cash and due from banks

$

75,555


$

68,773

Interest-earning bank balances


8,299



51,049

Cash and cash equivalents


83,854



119,822

Investment securities available for sale (amortized cost of $503,432 and $514,488 at September 30, 2012 and December 31, 2011, respectively)


508,173



515,545

Investment securities held to maturity (estimated fair value of $884 and $1,413 at September 30, 2012 and December 31, 2011, respectively)


821



1,344

Loans receivable (net of allowance for loan losses of $49,016 and $41,667 at September 30, 2012 and December 31, 2011, respectively)


2,261,980



2,249,455

  Loans held-for-sale, at cost


-



23,192

Loans held-for-sale, at fair value


60,676



-

Restricted equity investments


18,040



15,826

Bank properties and equipment, net


51,630



54,756

Real estate owned


5,513



5,020

Accrued interest receivable


8,183



8,912

Goodwill


38,188



38,188

Intangible assets


4,183



6,947

Bank owned life insurance (BOLI)


76,369



74,871

Other assets


62,925



70,038

Total assets

$

3,180,535


$

3,183,916







LIABILITIES AND SHAREHOLDERS' EQUITY






Liabilities:






Deposits

$

2,646,807


$

2,667,977

Federal funds purchased


30,000



-

Securities sold under agreements to repurchase – customers


3,587



5,668

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


16,749



2,733

Securities sold under agreements to repurchase – FHLBNY


20,000



15,000

Obligations under capital lease


7,675



7,868

Junior subordinated debentures


92,786



92,786

Deferred taxes, net


1,937



432

Other liabilities


73,514



82,369

Total liabilities


2,893,055



2,874,833







Shareholders' equity:






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


-



-

Common stock, $1 par value, 100,000,000 shares authorized; 88,143,024 shares issued and 86,036,301 shares outstanding at September 30, 2012; 87,825,038 shares issued and 85,718,315 shares outstanding at December 31, 2011


88,171



87,825

Additional paid-in capital


505,954



504,508

Retained deficit


(283,055)



(257,520)

Accumulated other comprehensive income


2,804



625

Deferred compensation plan trust


(232)



(193)

Treasury stock at cost, 2,106,723 shares at  September 30, 2012 and December 31, 2011


(26,162)



(26,162)

Total shareholders' equity


287,480



309,083

Total liabilities and shareholders' equity

$

3,180,535


$

3,183,916

 

SUN BANCORP, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF OPERATIONS (Unaudited)

(Dollars in thousands, except per share amounts)















For the Three Months

Ended September 30,



For the Nine Months Ended September 30,



2012



2011



2012



2011

INTEREST INCOME












Interest and fees on loans

$

25,631


$

28,149


$

78,037


$

85,115

Interest on taxable investment securities


2,221



2,603



7,278



8,086

Interest on non-taxable investment securities


393



542



1,228



1,984

Dividends on restricted equity investments


224



216



735



679

Total interest income


28,469



31,510



87,278



95,864

INTEREST EXPENSE












Interest on deposits


3,279



4,298



10,410



14,696

Interest on funds borrowed


259



356



978



1,067

Interest on junior subordinated debentures


597



675



2,023



2,302

Total interest expense


4,135



5,329



13,411



18,065

Net interest income


24,334



26,181



73,867



77,799

PROVISION FOR LOAN LOSSES


1,868



2,321



33,061



67,440

Net Interest income after provision for loan losses


22,466



23,860



40,806



10,359

NON-INTEREST INCOME












Service charges on deposit accounts


2,848



2,838



8,246



8,090

Other service charges


69



85



222



259

Gain on sale of loans


4,204



708



6,785



2,341

Impairment losses on available for sale securities


-



-



-



(250)

Gain on sale of investment securities


-



-



430



1,408

Investment products income


510



562



1,690



2,460

BOLI income


489



549



1,498



1,655

Derivative credit valuation adjustment


(198)



(309)



(525)



(12,324)

Other


1,666



1,337



4,289



3,025

Total non-interest income


9,588



5,770



22,635



6,664

NON-INTEREST EXPENSE












Salaries and employee benefits


16,128



13,619



46,655



39,490

Occupancy expense


3,275



3,021



9,595



9,730

Equipment expense


1,866



1,899



5,394



5,484

Amortization of intangible assets


922



922



2,764



2,764

Data processing expense


1,084



1,058



3,246



3,234

Professional fees


578



879



1,814



2,859

Insurance expenses


1,375



1,479



4,318



4,753

Advertising expense


464



395



1,769



2,282

Problem loan expense


2,154



1,506



4,905



6,476

Real estate owned expense, net


779



448



1,350



1,078

Office supplies expense


302



315



949



984

Other


1,933



1,432



6,251



3,865

Total non-interest expense


30,860



26,973



89,010



82,999

INCOME (LOSS) BEFORE INCOME TAXES


1,194



2,657



(25,569)



(65,976)

INCOME TAX (BENEFIT) EXPENSE


(34)



(23)



(34)



10

NET INCOME (LOSS) AVAILABLE TO COMMON SHAREHOLDERS

$

1,228


$

2,680


$

(25,535)


$

(65,986)













Basic earnings (loss) per share

$

0.01


$

0.03


$

(0.30)


$

(0.90)

Diluted earnings (loss) per share

$

0.01


$

0.03


$

(0.30)


$

(0.90)

Weighted average shares – basic

86,001,929


84,429,644


85,888,236


73,643,303

Weighted average shares - diluted

86,047,655


84,538,449


85,888,236


73,643,303

 

SUN BANCORP, INC. AND SUBSIDIARIES

HISTORICAL TRENDS IN QUARTERLY FINANCIAL DATA (Unaudited)

(Dollars in thousands)



2012


2012


2012


2011


2011


Q3


Q2


Q1


Q4


Q3

Balance sheet at quarter end: 










Cash and cash equivalents

$

83,854


$

115,891


$

87,553


$

119,822


$

134,209

Investment securities


527,034



549,849



576,457



532,715



557,380

Loans held-for-investment: 















        Commercial and industrial


1,802,060



1,794,830



1,820,054



1,878,026



1,899,231

        Home equity 


212,911



217,768



219,926



224,517



230,098

        Second mortgage 


32,610



36,429



38,815



41,470



45,030

        Residential real estate 


224,346



153,373



109,807



100,438



82,967

        Other 


39,069



42,486



36,952



46,671



49,077

            Total gross loans held-for-investment


2,310,996



2,244,886



2,225,554



2,291,122



2,306,403

Allowance for loan losses 


(49,016)



(51,394)



(52,127)



(41,667)



(55,227)

            Net loans held-for-investment


2,261,980



2,193,492



2,173,427



2,249,455



2,251,176

   Loans held-for-sale


60,676



24,672



25,034



23,192



20,868

    Goodwill 


38,188



38,188



38,188



38,188



38,188

    Intangible assets


4,183



5,104



6,025



6,947



7,868

    Total assets 


3,180,535



3,133,487



3,113,269



3,183,916



3,236,219

    Total deposits


2,646,807



2,608,034



2,631,652



2,667,977



2,727,650

   Federal funds purchased


30,000



-



-



-



-

    Securities sold under agreements to repurchase – customers


3,587



5,454



5,870



5,668



6,026

    Advances from FHLBNY


16,749



22,080



2,408



2,733



3,054

    Securities sold under agreements to repurchase – FHLBNY


20,000



15,000



15,000



15,000



15,000

    Obligations under capital lease


7,675



7,740



7,805



7,868



7,930

    Junior subordinated debentures


92,786



92,786



92,786



92,786



92,786

    Total shareholders' equity


287,480



284,768



283,163



309,083



308,055

Quarterly average balance sheet: 















    Loans(1)















        Commercial and industrial 

$

1,805,623


$

1,815,704


$

1,849,216


$

1,910,635


$

1,901,394

        Home equity


215,542



218,910



220,411



226,345



232,458

        Second mortgage 


35,816



38,545



41,346



44,600



47,844

        Residential real estate


230,259



155,479



123,567



111,514



89,010

        Other


33,658



34,765



41,733



46,248



49,361

            Total gross loans 


2,320,898



2,263,403



2,276,273



2,339,342



2,320,067

    Securities and other interest-earning assets 


555,846



583,788



580,349



602,485



616,679

    Total interest-earning assets 


2,876,744



2,847,191



2,856,622



2,941,827



2,936,746

    Total assets 


3,153,668



3,116,627



3,154,984



3,229,699



3,234,551

    Non-interest-bearing demand deposits 


504,936



493,707



487,088



536,558



528,505

    Total deposits 


2,642,048



2,604,083



2,621,736



2,706,772



2,716,542

    Total interest-bearing liabilities 


2,279,177



2,259,370



2,265,830



2,294,786



2,313,896

    Total shareholders' equity 


289,129



285,667



312,281



310,786



308,025

Capital and credit quality measures:















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















        Sun Bancorp, Inc.


14.30%



14.61%



14.49%



15.22%



14.85%

        Sun National Bank


13.63%



13.90%



13.77%



13.39%



13.07%

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















        Sun Bancorp, Inc.


12.73%



13.00%



12.86%



13.96%



13.59%

        Sun National Bank


12.37%



12.64%



12.51%



12.13%



11.81%

    Leverage ratio:















        Sun Bancorp, Inc.


10.43%



10.45%



10.21%



11.09%



11.08%

        Sun National Bank


10.12%



10.15%



9.93%



9.64%



9.64%
















    Average equity to average assets


9.17%



9.17%



9.91%



9.62%



9.52%

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


 

2.12%



 

2.29%



 

2.34%



 

1.82%



2.39%

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


5.32%



4.84%



5.27%



4.86%



6.04%

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


 

40.56%



 

49.44%



 

45.52%



 

38.69%



42.23%
















Other data:















Net charge-offs


(4,246)



(1,243)



(20,223)



(20,386)



(5,809)

Non-performing assets:















            Non-accrual loans

$

95,383


$

79,696


$

87,847


$

89,656


$

107,665

        Non-accrual loans held-for-sale


-



-



-



-



5,186

            Troubled debt restructurings, non-accrual


25,454



24,256



26,674



17,875



22,353

            Loans past due 90 days and accruing


-



-



74



154



744

            Real estate owned, net 


5,513



6,116



4,165



5,020



4,893

                Total non-performing assets


126,350



110,068



118,760



112,705



140,841

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

(2)      September 30, 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


2011


2011


Q3


Q2


Q1


Q4


Q3

Profitability for the quarter:










Tax-equivalent interest income

$

28,681


$

29,619


$

29,641


$

31,087


$

31,802

Interest expense


4,135



4,519



4,758



5,087



5,329

Tax-equivalent net interest income


24,546



25,098



24,883



26,000



26,473

Tax-equivalent adjustment


212



217



233



271



292

Provision for loan losses


1,868



510



30,683



6,826



2,321

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


9,588



7,527



5,519



6,804



5,770

Non-interest expense excluding amortization of intangible assets


29,938



29,666



26,643



26,305



26,051

Amortization of intangible assets


922



921



921



921



922

Income (loss) before income taxes


1,194



1,313



(28,078)



(1,519)



2,657

Income tax benefit


(34)



-



-



-



(23)

Net income (loss)


1,228



1,313



(28,078)



(1,519)



2,680

Net income (loss) available to common shareholders

$

 

1,228


$

 

1,313


$

 

(28,078)


$

 

(1,519)


$

2,680

Financial ratios:















Return on average assets (1)


0.16%



0.17%



(3.56)%



(0.19)%



0.33%

Return on average equity (1)


1.70%



1.84%



(35.97)%



(1.96)%



3.48%

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


1.99%



2.17%



(41.97)%



(2.29)%



4.10%

Net interest margin (1)


3.41%



3.53%



3.48%



3.54%



3.61%

Efficiency ratio


90.97%



94.38%



91.37%



83.69%



84.42%

Per share data:















Income (loss) per common share:















Basic

$

0.01


$

0.02


$

(0.34)


$

(0.02)


$

0.03

Diluted

$

0.01


$

0.02


$

(0.34)


$

(0.02)


$

0.03

Book value

$

3.34


$

3.31


$

3.30


$

3.61


$

3.60

Tangible book value

$

2.85


$

2.81


$

2.78


$

3.08


$

3.06

Average basic shares

86,001,929


85,884,671


85,776,858


85,587,878


84,429,644

Average diluted shares

86,047,655


85,916,421


85,776,858


85,587,878


84,538,449

Operating non-interest income:















Service charges on deposit accounts

$

2,848


$

2,730


$

2,668


$

2,799


$

2,838

Other service charges


69



80



73



71



85

Gain on sale of loans


4,204



1,865



716



906



708

Net gain on sale of available for sale securities


-



430



-



280



-

Investment products income


510



748



432



453



562

BOLI income


489



492



516



1,309



549

Derivative credit valuation adjustment


(198)



(13)



(314)



(214)



(309)

Other income


1,666



1,195



1,428



1,200



1,337

        Total non-interest income

$

9,588


$

7,527


$

5,519


$

6,804



5,770

Operating non-interest expense:















 Salaries and employee benefits

$

16,128


$

15,756


$

14,771


$

13,011


$

13,619

    Occupancy expense


3,275



3,271



3,049



3,643



3,021

    Equipment expense


1,866



1,763



1,765



1,858



1,899

    Data processing expense


1,084



1,106



1,056



1,118



1,058

    Amortization of intangible assets


922



921



921



921



922

    Insurance expense


1,375



1,464



1,479



1,433



1,479

    Professional fees


578



757



479



412



879

    Advertising expense


464



1,008



297



664



395

    Problem loan costs


2,154



1,274



1,477



1,866



1,506

    Real estate owned expense,net


779



490



81



108



448

    Office supplies expense


302



328



319



323



315

    Other expense


1,933



2,449



1,870



1,869



1,432

       Total non-interest expense

$

30,860


$

30,587


$

27,564


$

27,226


$

26,973

(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 equity

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 September 30,




2012



2011




Average


Income/


Yield/



Average


Income/


Yield/




Balance


Expense


Cost



Balance


Expense


Cost



Interest-earning assets:















Loans receivable (1),(2):















Commercial and industrial

$

1,805,623


$

20,139



4.46

%


$

1,901,394


$

23,028



4.84

%


Home equity


215,542



2,141



3.97




232,458



2,418



4.16



Second mortgage


35,816



518



5.79




47,844



698



5.84



Residential real estate


230,259



2,257



3.92




89,010



1,161



5.22



Other


33,658



576



6.85




49,361



844



6.84



Total loans receivable


2,320,898



25,631



4.42




2,320,067



28,149



4.85



Investment securities(3)


534,842



3,038



2.27




498,329



3,582



2.88



Interest-earning bank balances


21,004



12



0.23




118,350



71



0.24



Total interest-earning assets


2,876,744



28,681



3.99




2,936,746



31,802



4.33



Non-interest earning assets:





















  Cash and due from banks


75,627










72,744









  Bank properties and equipment, net


52,127










55,461









  Goodwill and intangible assets, net


42,826










46,511









  Other assets


106,344










123,089









Total non-interest-earning assets


276,924










297,805









Total assets

$

3,153,668









$

3,234,551






























Interest-bearing liabilities:





















Interest-bearing deposit accounts:





















Interest-bearing demand deposits

$

1,218,338


$

1,195



0.39

%


$

1,286,426


$

1,589



0.49

%


Savings deposits


264,112



225



0.34




270,196



321



0.48



Time deposits


654,662



1,859



1.14




631,415



2,388



1.51



Total interest-bearing deposit accounts


2,137,112



3,279



0.61




2,188,037



4,298



0.79



Short-term borrowings:





















Federal funds purchased


6,467



4



0.25




-



-



-



FHLBNY advances


20,000



22



0.44




-



-



-



Securities sold under agreements to repurchase - customers


4,925



2



0.16




6,952



1



0.06



Long-term borrowings:





















FHLBNY advances (4)


10,181



103



4.71




18,162



223



4.91



Obligations under capital lease


7,706



128



6.64




8,019



132



6.63



Junior subordinated debentures


92,786



597



2.57




92,786



675



2.91



Total borrowings


142,065



856



2.46




125,859



1,031



3.28



Total interest-bearing liabilities


2,279,177



4,135



0.73




2,313,896



5,329



0.92



Non-interest bearing liabilities:





















  Non-interest-bearing demand deposits


504,936










528,505









  Other liabilities


80,426










84,125









Total non-interest bearing liabilities


585,362










612,630









Total liabilities


2,864,539










2.926,526









Shareholders' equity 


289,129










308,025









Total liabilities and shareholders' equity

$

3,153,668









$

3,234,551






























Net interest income




$

24,546









$

26,473






Interest rate spread (5)








3.26

%









3.41

%


Net interest margin (6)








3.41

%









3.61

%


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








126.22

%









126.92

%





(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.



(3)  Interest earned on non-taxable investment securities is shown on a tax-equivalent basis assuming a 35% marginal federal tax rate for all periods. The fully taxable equivalent adjustments for the three months ended September 30, 2012 and 2011 were $212 thousand and $292 thousand, respectively.



(4)  Amounts include Advances from FHLBNY and Securities sold under agreements to repurchase - FHLBNY.



(5)  Interest rate spread represents the difference between the average yield on interest-earning assets and the average cost of interest-bearing liabilities.



(6)  Net interest margin represents net interest income as a percentage of average interest-earning assets.



 

SUN BANCORP, INC. AND SUBSIDIARIES


AVERAGE BALANCE SHEETS (Unaudited)

(Dollars in thousands)













 For the Nine Months Ended September 30,



2012



2011



Average


Income/


Yield/



Average


Income/


Yield/



Balance


Expense


Cost



Balance


Expense


Cost


Interest-earning assets:














Loans receivable (1),(2):














Commercial and industrial

$

1,823,449


$

62,537



4.57

%


$

1,969,551


$

69,565



4.71

%

Home equity


218,278



6,683



4.08




234,278



7,426



4.23


Second mortgage


38,559



1,658



5.73




50,481



2,207



5.83


Residential real estate


169,989



5,241



4.11




79,885



3,209



5.36


Other


36,707



1,918



6.97




52,656



2,708



6.86


Total loans receivable


2,286,982



78,037



4.55




2,386,851



85,115



4.75


Investment securities (3)


547,968



9,858



2.40




490,397



11,565



3.14


Interest-earning bank balances


25,296



44



0.23




139,297



253



0.24


Total interest-earning assets


2,860,246



87,939



4.10




3,016,545



96,933



4.28


Non-interest earning assets:




















  Cash and due from banks


73,292










71,980








  Bank properties and equipment, net


53,206










54,362








  Goodwill and intangible assets, net


43,743










47,424








  Other assets


111,242










114,496








Total non-interest-earning assets


281,483










288,262








Total assets

$

3,141,729









$

3,304,807




























Interest-bearing liabilities:




















Interest-bearing deposit accounts:




















Interest-bearing demand deposits

$

1,226,064


$

3,600



0.39

%


$

1,333,259


$

5,589



0.56

%

Savings deposits


263,091



671



0.34




274,280



1,127



0.55


Time deposits


638,259



6,139



1.28




689,738



7,980



1.54


Total interest-bearing deposit accounts