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Sun Bancorp, Inc. Reports First Quarter 2013 Results

First Quarter Highlights

- Profitable quarter with net income of $2.5 million

- Non-performing loans drop another 11% in Q1 and 39% over the past two quarters

- Successful workout resolutions generate $1.0 million in net recoveries for the quarter

- Prepared for rising interest rates by selling $125 million of investments and $52 million of jumbo fixed rate mortgages

- Solid capital ratios after risk reduction efforts with total risk based capital ratio of 14.2% and Tier 1 leverage ratio of 9.4%

- Tangible book value increases to $2.59 per share

Apr 24, 2013

VINELAND, N.J., April 24, 2013 /PRNewswire/ -- Sun Bancorp, Inc. (NASDAQ: SNBC) reported today net income available to common shareholders of $2.5 million, or $0.03 per diluted share, for the first quarter ended March 31, 2013, compared to a net loss available to common shareholders of $28.1 million, or a loss of $0.33 per diluted share, for the first quarter of 2012.

The following are key items and events that occurred during the first quarter of 2013:

  • The Company successfully closed a previously reported sale of $43.1 million of primarily distressed legacy commercial real estate loans with a book balance of $33.6 million to a third party investor in February 2013 for proceeds of $20.9 million.
  • Provision expense totaled $171 thousand as compared to $24.2 million in the fourth quarter of 2012. The allowance for loan losses equaled $47.1 million at quarter end, an increase of $1.3 million from December 31, 2012.  The allowance for loan losses equaled 2.09% of gross loans held-for-investment and 63.9% of non-performing loans held for investment as compared to 2.02% and 55.3%, respectively, at December 31, 2012 and 2.34% and 45.5%, respectively, at March 31, 2012.  
  • Non-interest income increased $4.1 million to $10.9 million as compared to the linked quarter primarily due to gains on the sale of available for sale securities of $3.5 million.
  • In March 2013, the Company sold a pool of $51.5 million of jumbo residential mortgage loans at a gain of $856 thousand.
  • The net interest margin equaled 3.16% versus 3.30% in the linked quarter. This decrease was driven by a decline in commercial loan yields as well as an increase of approximately $141 million in average interest-bearing bank balances resulting from the jumbo mortgage sale and the sale of available-for-sale investment securities in the first quarter.
  • Total risk-based capital equaled 14.2% at March 31, 2013, an increase of 50 basis points from 13.7% at December 31, 2012.

"We continue to make methodical progress in executing on our strategy to reduce the risk in the balance sheet and grow our commercial and consumer businesses," stated Thomas X. Geisel, Sun's President and Chief Executive Officer. "We were pleased to regain profitability during the quarter and to further reduce risk in our loan portfolio, thereby strengthening our foundation for the future.  We will continue to prioritize these efforts and enhance the profitability of the Bank as the year progresses." 

Discussion of Results:

Balance Sheet

  • Total assets were $3.23 billion at March 31, 2013, as compared to $3.22 billion at December 31, 2012 and $3.11 billion at March 31, 2012.
  • Cash and cash equivalents increased $142.0 million to $311.7 million as compared to the linked quarter, primarily due to the increase in interest earning bank balances due primarily to the aforementioned jumbo mortgage sale and sales of available-for-sale investment securities. Investments available-for-sale decreased $117.1 million from $443.2 million at December 31, 2012 to $326.1 million at March 31, 2013 due primarily to the sale of $124.8 million of securities, of which $94.6 million are pending settlement at March 31, 2013.
  • Gross loans held-for-investment were $2.25 billion at March 31, 2013, as compared to $2.27 billion at December 31, 2012 and $2.23 billion at March 31, 2012. Compared to the linked quarter, loans held-for-investment decreased by $24.6 million due primarily to large pay downs of problem loans of $17.2 million and charge-offs of $3.5 million in the first quarter.
  • Loans held-for-sale decreased $79.5 million from the linked quarter to $41.5 million at March 31, 2013. This was due to the closing of the commercial loan sale as well as a net decrease of $57.5 million in the residential mortgage loan held-for-sale portfolio.

Net Interest Income and Margin

  • On a tax equivalent basis, net interest income decreased $901 thousand over the linked quarter to $23.3 million at March 31, 2013. The net interest margin decreased 14 basis points to 3.16% from 3.30% for the linked quarter, and decreased 32 basis points as compared to the same quarter in 2012. The average yield on interest-earning assets decreased 17 basis points over the linked quarter from 3.87% to 3.70%. This decrease is due to a corresponding decline in loan yields and excess cash.  The Company held $312 million of cash as of March 31, 2013.  The commercial loan yields declined four basis points from the linked quarter due to lower rates on new originations combined with pay-offs of higher yielding legacy loans and a decrease of 18 basis points in home equity line of credit yields over the same period due to significantly lower market rates.  The margin variance from the prior year is due to similar pressures in the current interest rate environment.

Non-Interest Income

  • Non-interest income was $10.9 million for the quarter ended March 31, 2013, compared to $6.8 million for the quarter ended December 31, 2012 and $5.5 million for the comparable prior year quarter. The increase from the linked quarter was primarily attributable to a gain on sale of available for sale securities of $3.5 million recognized in the current quarter as compared to a loss of $196 thousand as well as a reduction of $1.2 million in derivative credit valuation adjustments for the current quarter as compared to the linked quarter. 

Non-Interest Expense

  • The Company incurred $31.3 million of non-interest expense in the first quarter of 2013, a decrease of $262 thousand over the linked quarter and an increase of $3.8 million from the comparable prior year quarter. Professional fees and salaries and benefits increased by $1.3 million and $488 thousand, respectively, from the linked quarter. Professional fees have increased due to additional compliance related consulting expenses incurred during the first quarter. These increases were partially offset by decreases in real estate owned costs, other expenses and advertising costs of $774 thousand, $500 thousand and $487 thousand, respectively.

Asset Quality

  • The provision for loan losses for the first quarter of 2013 was $171 thousand, as compared to $24.2 million in the linked quarter and $30.7 million in the comparable prior year quarter. The allowance for loan losses was $47.1 million at March 31, 2013, or 2.09% of gross loans held-for-investment, as compared to the allowance for loan losses to gross loans held-for-investment of 2.02% at December 31, 2012 and 2.34% at March 31, 2012. Recoveries were $4.6 million for the first quarter of 2013 primarily driven by the payoff of two commercial loans which resulted in $3.0 million of recoveries. Charge-offs recorded in the current quarter were $3.5 million, as compared to $26.7 million of charge-offs for the linked quarter and $20.2 million of charge-offs for the comparable prior year quarter.
  • Total non-performing assets were $82.3 million, or 3.57% of total gross loans held-for-investment, loans held-for-sale and real estate owned at March 31, 2013, as compared to $100.1 million, or 4.18% and $118.8 million, or 5.27%, respectively, at December 31, 2012 and March 31, 2012. Non-performing loans decreased $21.8 million over the linked quarter to $73.8 million at March 31, 2013 from $95.6 million at December 31, 2012 and decreased $40.8 million from $114.6 million at March 31, 2012. The decreases in non-performing loans were due primarily to paydowns and the settlement of nonperforming loans moved to held for sale in the fourth quarter of 2012, both for $12.7 million.

Capital

  • Shareholders' equity totaled $264.3 million at March 31, 2013 compared to $262.6 million at December 31, 2012. The Company's tangible equity to tangible assets ratio was 7.02% at March 31, 2013, as compared to 6.95% at December 31, 2012.  At March 31, 2013, the Company's total risk-based capital ratio, Tier 1 capital ratio and leverage capital ratio were approximately 14.21%, 12.33%, and 9.40%, respectively.  At March 31, 2013, Sun National Bank's total risk-based capital ratio, Tier 1 capital ratio and leverage capital ratio were approximately 13.52%, 12.26%, and 9.34%, respectively. 

The Company will hold its regularly scheduled conference call on Thursday, April 25, 2013, at 11:00 a.m. (ET).  Participants may listen to the live web cast through 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 website for two weeks following the call.

Sun Bancorp, Inc. (NASDAQ: SNBC) is a $3.23 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 about being prepared for rising interest rates, reducing risk in the loan portfolio, building the foundation for the future, reducing problem loans and improving profitability.  Actual results and trends could differ materially from those set forth in such statements and there can be no assurances that we will be prepared for rising interest rates, further reduce risk in our loan portfolio, build the desired foundation for the future, further reduce problem loans or improve profitability.  We caution that such statements are subject to a number of uncertainties, including those detailed under the headings "Risk Factors" and "Management's Discussion and Analysis" in the Company's Form 10-K for the fiscal year ended December 31, 2012 and in other filings made 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 March 31, 2013, December 31, 2012 and March 31, 2012 were $212 thousand, $210 thousand and $233 thousand, respectively. 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 March 31, 2013, December 31, 2012, September 30, 2012 and June 30, 2012. 

Tax-equivalent interest income

The following reconciles net interest income to net interest income on a fully taxable equivalent basis using a 35% tax rate for the three months ended March 31:

 

For Three Months Ended:


2013

2012









Net interest income


$

23,078


$  24,650

Effect of tax exempt income



212


233

Net interest income, tax equivalent basis


$

23,290


$  24,883

 


SUN BANCORP, INC. AND SUBSIDIARIES



FINANCIAL HIGHLIGHTS (Unaudited)



(Dollars in thousands, except per share amounts)




For the Three Months Ended




March 31,


December 31,





2013


2012


2012



Profitability for the period:









    Net interest income


$

23,078


$

24,650


 

$

23,981



    Provision for loan losses



171



30,683



24,154



    Non-interest income



10,882



5,519



6,815



    Non-interest expense



31,336



27,564



31,598



    Income (loss) before income taxes



2,453



(28,078)



(24,956)



    Net income (loss)



2,453



(28,078)



(24,956)



    Net income (loss) available to common shareholders


$

2,453


$

(28,078)


$

(24,956)















Financial ratios:












    Return on average assets(1) 



0.31

%


(3.56)

%


(3.13)

%


    Return on average equity(1)



3.73

%


(35.97)

%


(34.70)

%


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



4.42

%


(41.97)

%


(40.61)

%


    Net interest margin(1)



3.16

%


3.48

%


3.30

%


    Efficiency ratio



92.27

%


91.37

%


102.60

%


    Earnings (loss) per common share:












        Basic


$

0.03


$

(0.33)


$

(0.29)



        Diluted 


$

0.03


$

(0.33)


$

(0.29)















    Average equity to average assets



8.20

%


9.90

%


9.01

%




March 31,


December 31,







2013

2012


2012





At period-end:









    Total assets


$

3,227,146


$

3,113,269



3,224,031





    Total deposits



2,723,337



2,631,652



2,713,224





    Loans receivable, net of allowance for loan losses



2,204,436



2,173,426



2,230,287





    Loans held-for-sale



41,469



25,034



120,935





    Investments



335,844



576,457



461,980





    Borrowings



71,344



31,083



70,992





    Junior subordinated debentures



92,786



92,786



92,786





    Shareholders' equity



264,341



283,164



262,595



















Credit quality and capital ratios:














    Allowance for loan losses to gross loans 

  held-for-investment



2.09

%


2.34

%


2.02

%




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

    held-for-investment



3.28

%


5.15

%


3.64

%




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

      loans held-for-sale and real estate owned



3.57

%


5.27

%


4.18

%




    Allowance for loan losses to non-performing loans held for

      investment



63.87

%


45.52

%


55.33

%


















Total capital (to risk-weighted assets)(3) :














        Sun Bancorp, Inc.



14.21

%


14.49

%


13.72

%




        Sun National Bank



13.52

%


13.77

%


13.02

%




Tier 1 capital (to risk-weighted assets) (3):














        Sun Bancorp, Inc.



12.33

%


12.86

%


11.82

%




        Sun National Bank



12.26

%


12.51

%


11.76

%




Leverage ratio:














        Sun Bancorp, Inc.



9.40

%


10.21

%


9.30

%




        Sun National Bank



9.34

%


9.93

%


9.24

%


















    Book value per common share


$

3.06


$

3.30


$

3.05





    Tangible book value per common share


$

2.59


$

2.78


$

2.57





(1) Amounts for the three 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) March 31, 2013 capital ratios are estimated, subject to regulatory filings.

 

SUN BANCORP, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION (Unaudited)

(Dollars in thousands, except par value amounts)


March 31,

2013


December 31, 2012


ASSETS





Cash and due from banks

$

63,608


$

77,564


Interest-earning bank balances


248,052



92,052


Cash and cash equivalents


311,660



169,616


Investment securities available for sale (amortized cost of $315,810 and

  $439,488 at March 31, 2013 and December 31, 2012, respectively)


317,838



443,182


Investment securities held to maturity (estimated fair value of $920 and $960

  at March 31, 2013 and December 31, 2012, respectively)


881



912


Loans receivable (net of allowance for loan losses of $47,124 and $45,873 at

  March 31, 2013 and December 31, 2012, respectively)


2,204,436



2,230,287


Loans held-for-sale, at lower of cost or market


-



21,922


Loans held-for-sale, at fair value


41,469



99,013


Restricted equity investments, at cost


17,125



17,886


Bank properties and equipment, net


49,477



50,805


Real estate owned


8,472



7,473


Accrued interest receivable


7,704



8,054


Goodwill


38,188



38,188


Intangible assets


2,341



3,262


Bank owned life insurance (BOLI)


75,802



76,858


Receivable from sales and maturities of investments


101,947



-


Other assets


49,806



56,573


Total assets

$

3,227,146


$

3,224,031









LIABILITIES AND SHAREHOLDERS' EQUITY







Liabilities:







Deposits

$

2,723,337


$

2,713,224


Securities sold under agreements to repurchase – customers


2,726



1,968


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


61,077



61,415


Obligations under capital lease


7,541



7,609


Junior subordinated debentures


92,786



92,786


Deferred taxes, net


828



1,509


Other liabilities


74,510



82,925


Total liabilities


2,962,805



2,961,436









Shareholders' equity:







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





-


Common stock, $1 par value, 200,000,000 shares authorized; 88,403,100 shares

  issued and 86,292,929 shares outstanding at March 31, 2013; 88,300,637

  shares issued and 86,193,914 shares outstanding at December 31, 2012


88,403



88,301


Additional paid-in capital


506,773



506,537


Retained deficit


(305,558)



(308,011)


Accumulated other comprehensive income


1,200



2,186


Deferred compensation plan trust


(315)



(256)


Treasury stock at cost 2,106,723 shares at March 31, 2013 and December 31,

  2012


(26,162)



(26,162)


Total shareholders' equity


264,341



262,595


Total liabilities and shareholders' equity

$

3,227,146


$

3,224,031


 

SUN BANCORP, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF OPERATIONS (Unaudited)

(Dollars in thousands, except per share amounts)
















For the Three Months

Ended March 31,






2013



2012




INTEREST INCOME









Interest and fees on loans

$

24,899


$

26,204




Interest on taxable investment securities


1,544



2,542




Interest on non-taxable investment securities


394



434




Dividends on restricted equity investments


246



227




Total interest income


27,083



29,407




INTEREST EXPENSE









Interest on deposits


3,015



3,684




Interest on funds borrowed


443



351




Interest on junior subordinated debentures


547



722




Total interest expense


4,005



4,757




Net interest income


23,078



24,650




PROVISION FOR LOAN LOSSES


171



30,683




Net interest income (loss) after provision for loan losses


22,907



(6,033)




NON-INTEREST INCOME









Service charges on deposit accounts


2,155



2,668




Other service charges


74



73




Mortgage banking revenue, net


3,618



716




Net gain on sale of available for sale securities


3,487



-




Investment products income


679



432




BOLI income


448



517




Derivative credit valuation adjustment


(504)



(314)




Other


925



1,427




Total non-interest income


10,882



5,519




NON-INTEREST EXPENSE









Salaries and employee benefits


16,333



14,771




Occupancy expense


3,576



3,049




Equipment expense


1,859



1,765




Amortization of intangible assets


921



921




Data processing expense


999



1,056




Professional fees


2,647



479




Insurance expense


1,430



1,479




Advertising expense


553



297




Problem loan expense


799



1,477




Real estate owned expense, net


234



81




Office supplies expense


229



319




Other


1,756



1,870




Total non-interest expense


31,336



27,564




INCOME (LOSS) BEFORE INCOME TAXES


2,453



(28,078)




INCOME TAX EXPENSE


-



-




NET INCOME (LOSS) AVAILABLE TO COMMON SHAREHOLDERS

$

2,453


$

(28,078)













Basic earnings (loss) per share

$

0.03


$

(0.33)




Diluted earnings (loss) per share

$

0.03


$

(0.33)




Weighted average shares – basic

86,245,121


85,776,858




Weighted average shares - diluted

86,370,435


85,776,858




 


SUN BANCORP, INC. AND SUBSIDIARIES


HISTORICAL TRENDS IN QUARTERLY FINANCIAL DATA (Unaudited)


(Dollars in thousands)



2013


2012


2012


2012


2012



Q1


Q4


Q3


Q2


Q1


Balance sheet at quarter end: 











Cash and cash equivalents

$

311,660


$

169,616



83,854


$

115,891


$

87,553


Investment securities


335,844



461,980



527,034



549,849



576,457


Loans held-for-investment: 
















        Commercial and industrial


1,737,079



1,725,567



1,802,060



1,794,830



1,820,054


        Home equity 


200,084



207,720



212,911



217,768



219,926


        Second mortgage 


29,235



30,842



32,610



36,429



38,815


        Residential real estate 


248,875



273,413



224,346



153,373



109,807


        Other 


36,287



38,618



39,069



42,486



36,952


            Total gross loans held-for-investment


2,251,560



2,276,160



2,310,996



2,244,886



2,225,554


Allowance for loan losses 


(47,124)



(45,873)



(49,016)



(51,394)



(52,127)


            Net loans held-for-investment


2,204,436



2,230,287



2,261,980



2,193,492



2,173,427


   Loans held-for-sale


41,469



120,935



60,676



24,672



25,034


    Goodwill 


38,188



38,188



38,188



38,188



38,188


    Intangible assets


2,341



3,262



4,183



5,104



6,025


    Total assets 


3,227,146



3,224,031



3,180,263



3,133,487



3,113,269


    Total deposits


2,723,337



2,713,224



2,646,807



2,608,034



2,631,652


   Federal funds purchased


-



-



30,000



-



-


    Securities sold under agreements to

      repurchase - customers


2,726



1,968



3,587



5,454



5,870


    Advances from FHLBNY


61,077



61,415



16,749



22,080



2,408


    Securities sold under agreements to

      repurchase - FHLBNY


-



-



20,000



15,000



15,000


    Obligations under capital lease


7,541



7,609



7,675



7,740



7,805


    Junior subordinated debentures


92,786



92,786



92,786



92,786



92,786


    Total shareholders' equity


264,341



262,596



287,480



284,768



283,163


Quarterly average balance sheet: 
















    Loans(1)
















        Commercial and industrial 

$

1,744,553


$

1,788,347


$

1,805,623


$

1,815,704



1,849,216


        Home equity


204,311



210,085



215,542



218,910



220,411


        Second mortgage 


30,347



32,442



35,816



38,545



41,346


        Residential real estate


330,916



319,427



230,259



155,479



123,567


        Other


30,410



32,444



33,658



34,765



41,733


            Total gross loans 


2,340,537



2,382,745



2,320,898



2,263,403



2,276,273


    Securities and other interest-earning assets 


607,284



545,781



555,846



583,788



580,349


    Total interest-earning assets 


2,947,821



2,928,526



2,876,744



2,847,191



2,856,622


    Total assets 


3,206,536



3,193,607



3,153,668



3,116,627



3,154,762


    Non-interest-bearing demand deposits 


506,600



511,813



504,936



493,707



487,088


    Total deposits 


2,703,039



2,660,405



2,642,048



2,604,083



2,621,736


    Total interest-bearing liabilities 


2,360,883



2,318,794



2,279,177



2,259,370



2,265,830


    Total shareholders' equity 


263,070



287,698



289,129



285,667



312,281


Capital and credit quality measures:
















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
















        Sun Bancorp, Inc.


14.21%



13.72%



14.30

%


14.61

%


14.49

%

        Sun National Bank


13.52%



13.02%



13.63

%


13.90

%


13.77

%

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
















        Sun Bancorp, Inc.


12.33%



11.82%



12.71

%


13.00

%


12.86

%

        Sun National Bank


12.26%



11.76%



12.37

%


12.64

%


12.51

%

    Leverage ratio:
















        Sun Bancorp, Inc.


9.40%



9.30%



10.41

%


10.45

%


10.21

%

        Sun National Bank


9.34%



9.24%



10.12

%


10.15

%


9.93

%

















    Average equity to average assets


8.20%



9.01%



9.17

%


9.17

%


9.90

%

    Allowance for loan losses to total gross loans

      held-for-investment 


 

2.09%



 

2.02%



 

2.12

%


 

2.29

%


 

2.34

%

   Non-performing loans held-for-investment to

      gross loans held-for-investment


3.28%



3.64%



5.23

 

%


4.63

 

%


5.15

%

    Non-performing assets to gross loans

      held-for-investment, loans held-for-sale and

      real estate owned


3.57%



4.18%



5.32

 

 

%


4.84

 

 

%


5.27

%

    Allowance for loan losses to non-performing

      loans held-for-investment


 

63.87%



 

55.33%



 

40.56

%


 

49.44

%


 

45.52

%

















Other data:
















Net recoveries (charge-offs)


1,080



(26,690)



(4,246)



(1,243)



(20,223)


Non-performing assets:
















           Non-accrual loans

$

57,143


$

64,660


$

95,383


$

79,696


$

87,847


           Non-accrual loans held-for-sale


-



10,224



-



-



-


           Troubled debt restructurings, non-accrual


16,640



18,244



25,454



24,256



26,674


           Troubled debt restructurings, held-for-sale  


-



2,499



-



-



-


           Loans past due 90 days and accruing


-



-



-



-



74


           Real estate owned, net 


8,472



7,473



5,513



6,116



4,165


                Total non-performing assets


82,255



103,100



126,350



110,068



118,760


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

(2)     March 31, 2013 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)




2013


2012


2012


2012


2012




Q1


Q4


Q3


Q2


Q1



Profitability for the quarter:












Tax-equivalent interest income

$

27,295


$

28,367


$

28,681


$

29,619


$

29,641



Interest expense


4,005



4,174



4,135



4,519



4,757



Tax-equivalent net interest income


23,290



24,191



24,546



25,100



24,884



Tax-equivalent adjustment


212



212



212



217



234



Provision for loan losses


171



24,154



1,868



510



30,683



Non-interest income


10,882



6,815



9,588



7,527



5,519



Non-interest expense excluding

  amortization of intangible assets


30,415



30,677



29,938



29,666



26,643



Amortization of intangible assets


921



921



922



921



921



Income (loss) before income taxes


2,453



(24,956)



1,194



1,313



(28,078)



Income tax expense (benefit)


-



-



(34)



-



-



Net income (loss)


2,453



(24,956)



1,228



1,313



(28,078)



Net income (loss) available to common

  shareholders

$

2,453


$

 

(24,956)


$

1,228


$

 

1,313


$

 

(28,078)



Financial ratios:

















Return on average assets (1)


0.31%



(3.13)

%


0.16

%


0.17

%


(3.56)

%




Return on average equity (1)


3.73%



(34.70)

%


1.70

%


1.84

%


(35.97)

%




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


4.42%



(40.61)

%


1.99

%


2.17

%


(41.97)

%




Net interest margin (1)


3.16%



3.30

%


3.41

%


3.53

%


3.48

%




Efficiency ratio


92.27%



102.60

%


90.97

%


94.38

%


91.37

%




Per share data:



















Income (loss) per common share:



















Basic

$

0.03


$

(0.29)


$

0.01


$

0.02


$

(0.34)





Diluted

$

0.03


$

(0.29)


$

0.01


$

0.02


$

(0.34)





Book value

$

3.06


$

3.05


$

3.34


$

3.31


$

3.30





Tangible book value

$

2.59


$

2.57


$

2.85


$

2.81


$

2.78





Average basic shares

86,245,121


86,082,669


86,001,929


85,884,671


85,776,858





Average diluted shares

86,370,435


86,082,669


86,047,655


85,916,426


85,776,858





Non-interest income:



















Service charges on deposit accounts

$

2,155


$

2,414


$

2,848


$

2,730


$

2,668





Other service charges


74



72



69



80



73





Mortgage banking revenue, net


3,618



3,694



4,204



1,865



716





Net gain (loss) on sale of available for

  sale securities


3,487



(196)



-



430



-





Investment products income


679



606



510



748



432





BOLI income


448



488



489



492



516





Derivative credit valuation adjustment


(504)



(1,750)



(198)



(13)



(314)





Other income


925



1,487



1,666



1,195



1,428





        Total non-interest income


10,882



6,815



9,588



7,527



5,519





Non-interest expense:

















    Salaries and employee benefits

$

16,333


$

15,845


$

16,128


$

15,756


$

14,771



    Occupancy expense


3,576



3,416



3,275



3,271



3,049



    Equipment expense


1,859



2,005



1,866



1,763



1,765



    Amortization of intangible assets


921



921



922



921



921



    Data processing expense


999



1,138



1,084



1,106



1,056



    Professional fees


2,647



1,389



713



833



524



    Insurance expense


1,430



1,506



1,375



1,464



1,479



    Advertising expense


553



1,040



464



1,008



297



    Problem loan costs


799



776



2.154



1,274



1,477



    Real estate owned expense, net


234



1,008



779



490



81



    Office supplies expense


229



298



302



328



319



    Other expense


1,756



2,256



1,798



2,373



1,825



       Total non-interest expense


31,336



31,598



30,860



30,587



27,564



(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 March 31,



2013



2012



Average


Income/


Yield/



Average


Income/


Yield/



Balance


Expense


Cost



Balance


Expense


Cost


Interest-earning assets:














Loans receivable (1),(2):














Commercial and industrial

$

1,744,553



18,959



4.35

%


$

1,849,216


$

21,275



4.60

%

Home equity


204,311



1,906



3.73




220,411



2,244



4.07


Second mortgage


30,347



428



5.64




41,346



590



5.71


Residential real estate


330,916



3,071



3.71




123,567



1,376



4.45


Other


30,410



535



7.04




41,733



719



6.89


Total loans receivable


2,340,537



24,899



4.26




2,276,273



26,204



4.60


Investment securities(3)


428,024



2,285



2.14




550,498



3,420



2.49


Interest-earning bank balances


179,260



111



0.25




29,851



17



0.23


Total interest-earning assets


2,947,821



27,295



3.70




2,856,622



29,641



4.15


Non-interest earning assets:




















  Cash and due from banks


72,775










71,751








  Bank properties and equipment, net


50,363










54,338








  Goodwill and intangible assets, net


40,983










44,666








  Other assets


94,594










127,385








Total non-interest-earning assets


258,715










298,140








Total assets

$

3,206,536









$

3,154,762




























Interest-bearing liabilities:




















Interest-bearing deposit accounts:




















Interest-bearing demand deposits

$

1,241,861



1,111



0.36

%


$

1,251,690



1,259



0.40

%

Savings deposits


265,391



215



0.32




262,203



229



0.35


Time deposits


689,187



1,689



0.98




620,755



2,196



1.42


Total interest-bearing deposit

  accounts


2,196,439



3,015



0.55




2,134,648



3,684



0.69


Short-term borrowings:




















Federal funds purchased


-



-



-




6,374



6



0.38


Securities sold under agreements to

  repurchase - customers


2,926



1



0.14




6,669



2



0.12


Long-term borrowings:




















FHLBNY advances (4)


61,160



316



2.07




17,519



214



4.89


Obligation under capital lease


7,572



126



6.66




7,834



130



6.64


Junior subordinated debentures


92,786



547



2.36




92,786



722



3.11


Total borrowings


164,444



990



2.41




131,182



1,074



3.27


Total interest-bearing liabilities


2,360,883



4,005



0.68




2,265,830



4,758



0.84


Non-interest bearing liabilities:




















  Non-interest-bearing demand deposits


506,600










487,088








  Other liabilities


75,983










89,562








Total non-interest bearing liabilities


582,583










576,650








Total liabilities


2,943,466










2,842,480








Shareholders' equity 


263,070










312,281








Total liabilities and shareholders'

  equity

$

3,206,536









$

3,154,762




























Net interest income




$

23,290









$

24,883





Interest rate spread (5)








3.02

%









3.31

%

Net interest margin (6)








3.16

%









3.48

%

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








124.86

%









126.07

%

(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 March 31, 2013 and 2012 were $212 thousand and $233 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 Three Months Ended



March 31, 2013



December 31, 2012



Average


Income/


Yield/



Average


Income/


Yield/



Balance


Expense


Cost



Balance


Expense


Cost


Interest-earning assets:














Loans receivable (1),(2):














Commercial and industrial

$

1,744,553



18,959



4.35

%


$

1,788,347


$

19,628



4.39

%

Home equity


204,311



1,906



3.73




210,085



2,055



3.91


Second mortgage


30,347



428



5.64




32,442



470



5.79


Residential real estate


330,916



3,071



3.71




319,427



2,959



3.71


Other


30,410



535



7.04




32,444



559



6.89


Total loans receivable


2,340,537



24,899



4.26




2,382,745



25,671



4.31


Investment securities(3)


428,024



2,285



2.14




507,158



2,672



2.11


Interest-earning bank balances


179,260



111



0.25




38,623



24



0.25


Total interest-earning assets


2,947,821



27,295



3.70




2,928,526



28,367



3.87


Non-interest earning assets:




















  Cash and due from banks


72,775










72,129








  Bank properties and equipment, net


50,363










51,515








  Goodwill and intangible assets, net


40,983










41,902








  Other assets


94,594










99,535








Total non-interest-earning assets


258,715










265,081








Total assets

$

3,206,536









$

3,193,607




























Interest-bearing liabilities:




















Interest-bearing deposit accounts:




















Interest-bearing demand deposits

$

1,241,861



1,111



0.36

%


$

</