Sun Bancorp, Inc. Reports Fourth Quarter 2011 Results

VINELAND, N.J. Jan. 30, 2012 /PRNewswire/ -- Sun Bancorp, Inc. (Nasdaq: SNBC) reported today a net loss available to common shareholders of $1.5 million, or a loss of $0.02 per diluted share, for the fourth quarter ended December 31, 2011, compared to a net loss available to common shareholders of $28.2 million, or a loss of $0.67 per diluted share, for the fourth quarter ended December 31, 2010 which included a $25.1 million net loss on the sale of commercial real estate loans, and net income available to common shareholders of $2.7 million, or earnings of $0.03 per diluted share, for the third quarter ended September 30, 2011.

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

  • Non-performing loans decreased $27.5 million to $107.7 million at December 31, 2011 as compared to $135.9 million at September 30, 2011. Non-performing assets declined by $28.1 million from the linked quarter to $112.7 million at December 31, 2011.

  • Net charge-offs equaled $20.4 million, of which $17.0 million were related to the charge-off of previously established specific reserves. Provision expense totaled $6.8 million and the allowance for loan losses equaled $41.7 million, a decrease of $13.6 million from the prior quarter.

  • Average loans for the fourth quarter totaled $2.34 billion, up $19.3 million or 0.8%, compared to the prior quarter. Average deposits were down $9.8 million versus the prior quarter. The net interest margin equaled 3.54% versus 3.61% in the prior quarter.

  • Non-interest income increased $1.0 million to $6.8 million primarily due to a bank-owned life insurance distribution of $765 thousand and gains of $280 thousand on the sale of investment securities.

  • Tangible equity to assets equaled 8.41% as compared to 8.21% in the third quarter. Total Risk-based Capital equaled 15.22%.

"2011 was a year of commitment to our customers and the revitalization of our company.  We rolled up our sleeves and achieved the goals we set out to: we added talent, strengthened the balance sheet, improved operating performance and grew commercial loan production year-over-year by 36%," said Thomas X. Geisel, Sun's President and Chief Executive Officer.  "We ended the year with strong capital and reserves and are well positioned to continue our positive asset quality and operating trends.  We look forward to executing our corporate strategy in 2012 to serve our customers, create earnings and grow from the platform we established."

For the full year ended December 31, 2011, the Company reported a net loss of $67.5 million, or $0.88 per diluted share, as compared to a net loss of $185.4 million, or $6.56 per diluted share, in 2010.  Provision for loan losses totaled $74.3 million in 2011 versus $101.5 million in 2010.  Non-interest expense equaled $110.2 million in 2011 versus $201.1 million in the prior year.  Non-interest expense in 2010 included a goodwill impairment charge of $89.7 million.  Total assets at December 31, 2011 equaled $3.18 billion as compared to $3.42 billion at December 31, 2010.

Discussion of Results:

Balance Sheet

  • Total assets were $3.18 billion at December 31, 2011, as compared to $3.24 billion at September 30, 2011 and $3.42 billion at December 31, 2010.

  • Gross loans held-for-investment were $2.29 billion at December 31, 2011, as compared to $2.31 billion at September 30, 2011 and $2.52 billion at December 31, 2010. Compared to the linked quarter, loans held-for-investment decreased by $15.3 million as the Company recorded net charge-offs of $20.4 million in the fourth quarter.

  • Loans held-for-sale increased $2.3 million from the linked quarter to $23.2 million at December 31, 2011.

  • Shareholders' equity increased $1.0 million to $309.1 million at December 31, 2011 as compared to the linked quarter.

Net Interest Income and Margin

  • On a tax equivalent basis, net interest income decreased $473 thousand over the linked quarter to $26.0 million. The average cost of interest-bearing liabilities decreased three basis points to 0.89%. The average yield on interest-earning assets decreased 10 basis points over the linked quarter from 4.33% to 4.23%. The net interest margin declined seven basis points to 3.54% from 3.61% for the linked quarter. The margin increased 17 basis points from 3.37% for the comparable prior year quarter.

Non-Interest Income

  • Non-interest income was $6.8 million for the quarter ended December 31, 2011, an increase of $1.0 million over the linked quarter of $5.8 million and $993 thousand million below the comparable prior year quarter income of $7.8 million. The increase over the linked quarter was primarily attributable to a bank-owned life insurance distribution of $765 thousand and gains on the sale of investment securities of $280 thousand.

Non-Interest Expense

  • The Company incurred $27.2 million of non-interest expense in the fourth quarter of 2011, an increase of $253 thousand over the linked quarter and a decrease of $723 thousand from the comparable prior year quarter. Higher problem loan and occupancy expenses were partially offset by lower personnel and legal expenses.

Asset Quality

  • The provision for loan losses for the fourth quarter was $6.8 million, as compared to $2.3 million in the linked quarter and $35.5 million in the comparable prior year quarter. The allowance for loan losses was $41.7 million at December 31, 2011, or 1.82% of gross loans held-for-investment, as compared to the allowance for loan losses to gross loans held-for-investment of 2.39% at September 30, 2011 and 3.24% at December 31, 2010. Net charge-offs recorded in the current quarter were $20.4 million, or 0.87% of average loans, as compared to $5.8 million, or 0.25% of average loans for the linked quarter and $28.4 million, or 1.05% of average loans outstanding for the comparable prior year quarter. The prior year quarter included charge-offs of $21.7 million related to the sale of commercial real estate loans.

  • Total non-performing assets were $112.7 million, or 4.86% of total gross loans held-for-investment, loans held-for-sale and real estate owned at December 31, 2011, as compared to $140.8 million, or 6.04% and $177.7 million, or 7.00%, respectively, at September 30, 2011 and December 31, 2010. Non-performing loans decreased $27.5 million over the linked quarter to $107.7 million at December 31, 2011 from $135.2 million at September 30, 2011.

Capital

  • Stockholders' equity totaled $309.1 million at December 31, 2011 compared to $308.1 million at September 30, 2011. The Company's tangible equity to tangible assets ratio was 8.41% at December 31, 2011, as compared to 8.21% at September 30, 2011 and 6.51% at December 31, 2010. At December 31, 2011, the Company's total risk-based capital ratio, Tier 1 capital ratio and leverage capital ratio were approximately 15.22%, 13.96%, and 11.09%, respectively. At December 31, 2011, Sun National Bank's total risk-based capital ratio, Tier 1 capital ratio and leverage capital ratio were approximately 13.39%, 12.13%, and 9.64%, respectively.

The Company will hold its regularly scheduled conference call on Tuesday, January 31, 2012, 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 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 65 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 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