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Sun Bancorp, Inc. Reports Fourth Quarter 2012 Results

- 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

Jan 23, 2013

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.

   

(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 December 31, 2012 and 2011 were $210 thousand and $271 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 Twelve 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

$

1,814,626

 

$

82,165

   

4.53

%

 

$

1,954,701

 

$

92,107

   

4.71

%

Home equity

 

216,218

   

8,738

   

4.04

     

232,278

   

9,774

   

4.21

 

Second mortgage

 

37,021

   

2,128

   

5.75

     

48,998

   

2,863

   

5.84

 

Residential real estate

 

207,553

   

8,199

   

3.95

     

87,858

   

4,547

   

5.18

 

Other

 

35,636

   

2,477

   

6.95

     

51,041

   

3,502

   

6.86

 

Total loans receivable

 

2,311,054

   

103,707

   

4.49

     

2,374,876

   

112,793

   

4.75

 

Investment securities (3)

 

537,710

   

12,529

   

2.33

     

505,006

   

14,940

   

2.96

 

Interest-earning bank balances

 

28,646

   

68

   

0.24

     

117,830

   

288

   

0.24

 

Total interest-earning assets

 

2,877,410