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

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, 2011 and 2010 were $271 thousand and $382 thousand, respectively.  The fully taxable equivalent adjustments for the twelve months ended December 31, 2011 and 2010 were $1.3 million and $1.8 million, respectively.  The fully taxable equivalent adjustment for the three months ended September 30, 2011 was $292 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.  Non-operating loss for the three months ended March 31, 2011 and December 31, 2010 was $250 thousand and $379 thousand, respectively.  There were no non-operating income items during the three months ended December 31, 2011, September 30, 2011 or June 30, 2011.


SUN BANCORP, INC. AND SUBSIDIARIES


FINANCIAL HIGHLIGHTS (Unaudited)


(Dollars in thousands, except per share amounts)



For the Three Months Ended


For the Twelve Months Ended



December 31,


December 31,




2011


2010


2011


2010


Profitability for the period:










    Net interest income


$

25,729


$

27,273


$

103,528


$

110,962


    Provision for loan losses



6,826



35,511



74,266



101,518


    Non-interest income (loss)



6,804



7,797



13,468



15,512


    Non-interest expense



27,226



27,949



110,225



201,052


    Loss before income taxes



(1,519)



(28,390)



(67,495)



(176,096)


    Net loss



(1,519)



(28,493)



(67,505)



(185,418)


    Net loss available to common shareholders


$

(1,519)


$

(28,219)


$

(67,505)


$

(185,418)
















Financial ratios:














    Return on average assets(1) 



(0.19)

%


(3.14)

%


(2.05)

%


(5.19)

%

    Return on average equity(1)



(1.96)

%


(37.88)

%


(22.57)

%


(56.82)

%

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



(2.29)

%


(45.43)

%


(26.77)

%


(80.23)

%

    Net interest margin(1)



3.54

%


3.37

%


3.50

%


3.50

%

    Efficiency ratio



83.69

%


78.67

%


94.21

%


158.68

%

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



83.69

%


77.83

%


94.01

%


86.84

%















    Loss per common share:














        Basic


$

(0.02)


$

(0.67)


$

(0.88)


$

(6.56)


        Diluted 


$

(0.02)


$

(0.67)


$

(0.88)


$

(6.56)
















    Average equity to average assets



9.62

%


8.29

%


9.10

%


9.13

%



December 31,







2011

2010





At period-end:







    Total assets


$

3,183,916


$

3,417,546






    Total deposits



2,667,977



2,940,460






    Loans receivable, net of allowance for loan losses



2,249,455



2,439,633






    Loans held-for-sale



23,192



13,824






    Investments



532,715



493,493






    Borrowings



31,269



33,417






    Junior subordinated debentures



92,786



92,786






    Shareholders' equity



309,083



268,242


















Credit quality and capital ratios:












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



1.82

%


3.24

%





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



4.86

%


7.00

%





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



38.69

%


47.02

%

















Total capital (to risk-weighted assets):












        Sun Bancorp, Inc.



15.22

%


12.68

%





        Sun National Bank



13.39

%


12.25

%





Tier 1 capital (to risk-weighted assets):












        Sun Bancorp, Inc.



13.96

%


11.41

%





        Sun National Bank



12.13

%


10.98

%





Leverage ratio:












        Sun Bancorp, Inc.



11.09

%


8.93

%





        Sun National Bank



9.64

%


8.57

%

















    Book value per common share


$

3.61


$

5.33






    Tangible book value per common share


$

3.08


$

4.36






(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 twelve months ended December 31, 2011 excludes net impairment losses on available for sale securities of $250 thousand. Non-interest income for the three and twelve months ended December 31, 2010 exclude a net impairment loss on available for sale securities of $379 thousand and $1.3 million, respectively. Non-interest expense for the twelve months ended December 31, 2010 excludes a goodwill impairment charge of $89.7 million.






SUN BANCORP, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION (Unaudited)

(Dollars in thousands, except par value amounts)


December 31, 2011


December 31, 2010


ASSETS





Cash and due from banks

$

68,773


$

36,522


Interest-earning bank balances


51,049



150,704


Cash and cash equivalents


119,822



187,226


Investment securities available for sale (amortized cost of $514,488 and $483,255 at December 31, 2011 and December 31, 2010, respectively)


515,545



472,864


Investment securities held to maturity (estimated fair value of $1,413 and $3,155 at December 31, 2011 and December 31, 2010, respectively)


1,344



3,039


Loans receivable (net of allowance for loan losses of $41,667 and $81,713 at December 31, 2011 and December 31, 2010, respectively)


2,249,455



2,439,633


Loans held-for-sale


23,192



13,824


Restricted equity investments


15,826



17,590


Bank properties and equipment, net


54,756



53,428


Real estate owned


5,020



3,913


Accrued interest receivable


8,912



10,004


Goodwill


38,188



38,188


Intangible assets


6,947



10,631


Deferred taxes, net


-



4,245


Bank owned life insurance (BOLI)


74,871



74,656


Other assets


70,038



88,305


Total assets

$

3,183,916


$

3,417,546









LIABILITIES AND SHAREHOLDERS' EQUITY







Liabilities:







Deposits

$

2,667,977


$

2,940,460


Securities sold under agreements to repurchase – customers


5,668



6,307


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


2,733



3,999


Securities sold under agreements to repurchase – FHLBNY


15,000



15,000


Obligations under capital lease


7,868



8,111


Junior subordinated debentures


92,786



92,786


Deferred taxes, net


432



-


Other liabilities


82,369



82,641


Total liabilities


2,874,833



3,149,304









Shareholders' equity:







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


-



-


Common stock, $1 par value, 200,000,000 shares authorized; 87,818,503 shares issued and 85,711,780 shares outstanding at December 31, 2011; 52,463,594 shares issued and 50,356,871 shares outstanding at December 31, 2010


87,825



52,464


Additional paid-in capital


504,508



438,335


Retained deficit


(257,520)



(190,015)


Accumulated other comprehensive income (loss)


625



(6,146)


Deferred compensation plan trust


(193)



(234)


Treasury stock at cost, 2,106,723 shares at December 31, 2011 and December 31, 2010


(26,162)



(26,162)


Total shareholders' equity


309,083



268,242


Total liabilities and shareholders' equity

$

3,183,916


$

3,417,546






SUN BANCORP, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF OPERATIONS (Unaudited)

(Dollars in thousands, except per share amounts)
















For the Three Months
Ended December 31,




For the Twelve Months
Ended December 31,




2011



2010




2011



2010


INTEREST INCOME














Interest and fees on loans

$

27,678


$

31,415



$

112,793


$

129,391


Interest on taxable investment securities


2,421



2,991




10,507



11,993


Interest on non-taxable investment securities


503



710




2,487



3,344


Dividends on restricted equity investments


214



238




893



875


Total interest income


30,816



35,354




126,680



145,603


INTEREST EXPENSE














Interest on deposits


4,041



6,657




18,737



28,780


Interest on funds borrowed


351



392




1,418



1,744


Interest on junior subordinated debentures


695



1,032




2,997



4,117


Total interest expense


5,087



8,081




23,152



34,641


Net interest income


25,729



27,273




103,528



110,962


PROVISION FOR LOAN LOSSES


6,826



35,511




74,266



101,518


Net Interest income (loss) after provision for loan losses


18,903



(8,238)




29,262



9,444


NON-INTEREST INCOME














Service charges on deposit accounts


2,799



2,715




10,889



11,572


Other service charges


71



94




330



364


Gain on sale of loans


906



1,324




3,247



3,560


Impairment losses on available for sale securities


-



(379)




(250)



(1,329)


Gain on sale of AFS Securities


280



4,607




1,688



4,751


Investment products income


453



726




2,913



2,831


BOLI income


1,309



452




2,964



2,074


Derivative credit valuation adjustment


(214)



(2,705)




(12,538)



(12,214)


Other


1,200



963




4,225



3,903


Total non-interest income (loss)


6,804



7,797




13,468



15,512


NON-INTEREST EXPENSE














Salaries and employee benefits


13,011



12,920




52,501



55,219


Occupancy expense


3,643



3,043




13,373



12,508


Equipment expense


1,858



1,634




7,342



6,783


Amortization of intangible assets


921



921




3,685



3,685


Goodwill impairment


-



-




-



89,706


Data processing expense


1,118



1,133




4,352



4,359


Professional fees


412



1,220




3,271



2,724


Insurance expense


1,433



2,064




6,186



7,696


Advertising expense


664



390




2,946



2,335


Problem loan costs


1,866



1,923




8,342



5,162


Real estate owned expense, net


108



398




1,186



801


Office supplies expense


323



338




1,307



1,501


Other expense


1,869



1,965




5,734



8,573


Total non-interest expense


27,226



27,949




110,225



201,052


LOSS BEFORE INCOME TAXES


(1,519)



(28,390)




(67,495)



(176,096)


INCOME TAX EXPENSE


-



103




10



9,322


NET LOSS


(1,519)



(28,493)




(67,505)



(185,418)


 Preferred stock dividends and discount accretion


-



(274)




-



-


NET LOSS AVAILABLE TO COMMON SHAREHOLDERS

$

(1,519)


$

(28,219)



$

(67,505)


$

(185,418)
















Basic loss per share

$

(0.02)


$

(0.67)



$

(0.88)


$

(6.56)


Diluted loss per share

$

(0.02)


$

(0.67)



$

(0.88)


$

(6.56)


Weighted average shares – basic

85,587,878


42,119,553



76,653,990


28,258,953


Weighted average shares - diluted

85,587,878


42,119,553



76,653,990


28,258,953






SUN BANCORP, INC. AND SUBSIDIARIES


HISTORICAL TRENDS IN QUARTERLY FINANCIAL DATA (Unaudited)


(Dollars in thousands)



2011


2011


2011


2011


2010



      Q4


      Q3


      Q2


      Q1


      Q4


Balance sheet at quarter end: 











Cash and cash equivalents

$

119,822



134,209


$

192,645


$

266,504


$

187,226


Investment securities


532,715



557,380



478,814



470,546



493,493


Loans held-for-investment: 
















        Commercial and industrial


1,878,026



1,899,231



1,905,628



1,862,903



2,103,492


        Home equity 


224,517



230,098



234,688



232,318



239,729


        Second mortgage 


41,470



45,030



47,920



50,388



53,912


        Residential real estate 


100,438



82,967



75,546



69,311



65,250


        Other 


46,671



49,077



52,825



55,402



58,963


            Total gross loans held-for-investment


2,291,122



2,306,403



2,316,607



2,270,322



2,521,346


Allowance for loan losses 


(41,667)



(55,227)



(58,328)



(58,498)



(81,713)


            Net loans held-for-investment


2,249,455



2,251,176



2,258,279



2,211,824



2,439,633


  Loans held-for-sale


23,192



20,868



20,514



115,473



13,824


    Goodwill 


38,188



38,188



38,188



38,188



38,188


    Intangible assets


6,947



7,868



8,789



9,710



10,631


    Total assets 


3,183,916



3,236,219



3,213,790



3,333,808



3,417,546


    Total deposits


2,667,977



2,727,650



2,723,676



2,847,467



2,940,460


    Securities sold under agreements to repurchase - customers


5,668



6,026



6,743



6,591



6,307


    Advances from FHLBNY


2,733



3,054



3,372



3,687



3,999


    Securities sold under agreements to repurchase - FHLBNY


15,000



15,000



15,000



15,000



15,000


    Obligations under capital lease


7,868



7,930



7,991



8,051



8,111


    Junior subordinated debentures


92,786



92,786



92,786



92,786



92,786


    Total shareholders' equity


309,083



308,055



298,819



286,739



268,242


Quarterly average balance sheet: 
















    Loans(1): 
















        Commercial and industrial 

$

1,910,635


$

1,901,394


$

1,936,621



2,072,519


$

2,184,212


        Home equity


226,345



232,458



234,451



235,962



241,510


        Second mortgage 


44,600



47,844



50,257



53,402



57,310


        Residential real estate


111,514



89,010



76,816



73,662



88,144


        Other


46,248



49,361



52,831



55,847



57,522


            Total gross loans 


2,339,342



2,320,067



2,350,976



2,491,392



2,628,698


    Securities and other interest-earning assets 


602,485



616,679



643,808



639,092



658,013


    Total interest-earning assets 


2,941,827



2,936,746



2,994,784



3,130,484



3,286,711


    Total assets 


3,229,699



3,234,551



3,287,485



3,394,139



3,582,647


    Non-interest-bearing demand deposits 


536,558



528,505



491,235



481,605



509,093


    Total deposits 


2,706,772



2,716,542



2,774,767



2,904,448



3,032,594


    Total interest-bearing liabilities 


2,294,786



2,313,896



2,409,629



2,549,566



2,657,984


    Total shareholders' equity 


310,786



308,025



299,427



277,808



297,118


Capital and credit quality measures:
















Total capital (to risk-weighted assets):
















        Sun Bancorp, Inc.


15.22%



14.85

%


14.51

%


13.73

%


12.68

%

        Sun National Bank


13.39%



13.07

%


12.97

%


12.65

%


12.25

%

    Tier 1 capital (to risk-weighted assets):
















        Sun Bancorp, Inc.


13.96%



13.59

%


13.14

%


12.11

%


11.41

%

        Sun National Bank


12.13%



11.81

%


11.71

%


11.38

%


10.98

%

    Leverage ratio:
















        Sun Bancorp, Inc.


11.09%



11.08

%


10.47

%


9.62

%


8.93

%

        Sun National Bank


9.64%



9.64

%


9.35

%


9.05

%


8.57

%

















    Average equity to average assets


9.62%



9.52

%


9.11

%


8.18

%


8.29

%

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



1.82%



2.39

%


2.52

%


2.58

%


3.24

%

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


4.86%



6.04



%


6.13



%




8.04



%


7.00

%

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



38.69%



42.23

%


45.25

%


50.41

%


47.02

%

















Other data:
















Net charge-offs


(20,386)



(5,809)



(5,006)



(83,498)



(28,377)


Non-performing assets:
















            Non-accrual loans

$

89,656


$

107,665


$

113,806


$

113,959


$

159,426


       Non-accrual loans held-for-sale


-



5,186



11,296



71,771



-


            Troubled debt restructurings, non-accrual


17,875



22,353



15,090



831



11,796


            Loans past due 90 days and accruing


154



744



-



1,263



2,554


            Real estate owned, net 


5,020



4,893



3,306



4,439



3,913


                Total non-performing assets


112,705



140,841



143,498



192,263



177,689


        Troubled debt restructuring, performing


-



-



-



20,276



20,341


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






SUN BANCORP, INC. AND SUBSIDIARIES


HISTORICAL TRENDS IN QUARTERLY FINANCIAL DATA (Unaudited)


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



2011


2011


2011


2011


2010



      Q4


      Q3


      Q2


      Q1


      Q4


Profitability for the quarter:











Tax-equivalent interest income

$

31,087


$

31,802


$

32,673


$

32,458


$

35,736


Interest expense


5,087



5,329



5,813



6,923



8,081


Tax-equivalent net interest income


26,000



26,473



26,860



25,535



27,655


Tax-equivalent adjustment


271



292



368



409



382


Provision for loan losses


6,826



2,321



4,836



60,283



35,511


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


6,804



5,770



4,993



(3,849)



8,176


Net impairment losses on available for sale securities


-



-



-



(250)



(379)


Non-interest expense excluding amortization of intangible assets


26,305



26,051



27,323



26,861



27,028


Amortization of intangible assets


921



922



921



921



921


(Loss) income before income taxes


(1,519)



2,657



(1,595)



(67,038)



(28,390)


Income tax (benefit) expense


-



(23)



4



29



103


Net (loss) income


(1,519)



2,680



(1,599)



(67,067)



(28,493)


Net (loss) income available to common shareholders

$


(1,519)


$

2,680


$

(1,599)


$

(67,067)


$

(28,219)


Financial ratios:
















Return on average assets (1)


(0.19)%



0.33

%


(0.19)

%


(7.90)

%


(3.18)

%

Return on average equity (1)


(1.96)%



3.48

%


(2.14)

%


(96.57)

%


(38.36)

%

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


(2.29)%



4.10

%


(2.54)

%


(116.91)

%


(46.01)

%

Net interest margin (1)


3.54%



3.61

%


3.59

%


3.26

%


3.37

%

Efficiency ratio


83.69%



84.42

%


89.71

%


132.13

%


79.69

%

Efficiency ratio, excluding non-operating income and non-operating expense


83.69%



84.42

%


89.71

%


130.57

%


78.84

%

Per share data:
















Income (loss) per common share:
















Basic

$

(0.02)


$

0.03


$

(0.02)


$

(1.25)


$

(0.67)


Diluted

$

(0.02)


$

0.03


$

(0.02)


$

(1.25)


$

(0.67)


Book value

$

3.61


$

3.60


$

3.60


$

3.62


$

5.33


Tangible book value

$

3.08


$

3.06


$

3.03


$

3.02


$

4.36


Average basic shares

85,587,878


84,429,644


82,585,859


53,575,346


42,119,553


Average diluted shares

85,587,878


84,538,449


82,585,859


53,575,346


42,119,553


Operating non-interest income (loss):
















Service charges on deposit accounts

$

2,799



2,838


$

2,702


$

2,550


$

2,715


Other service charges


71



85



88



86



94


Gain on sale of loans


906



708



708



925



1,324


Net gain (loss) on sale of available for sale securities


280



-



2,421



(1,013)



4,606


Investment products income


453



562



1,010



888



728


BOLI income


1,309



549



560



546



452


Derivative credit valuation adjustment


(214)



(309)



(3,624)



(8,391)



(2,705)


Other income


1,200



1,337



1,128



560



962


        Total operating non-interest income (loss)


6,804



5,770



4,993



(3,849)



8,176


Non-operating loss(3):
















Net impairment losses on available for sale securities recognized in earnings


-



-



-



(250)



(379)


        Total non-operating loss





-



-



(250)



(379)


        Total non-interest income (loss)

$

6,804



5,770


$

4,993


$

(4,099)


$

7,797


Operating non-interest expense:
















    Salaries and employee benefits

$

13,011


$

13,619


$

12,885


$

12,986


$

12,920


    Occupancy expense


3,643



3,021



3,305



3,404



3,043


    Equipment expense


1,858



1,899



1,903



1,682



1,634


    Data processing expense


1,118



1,058



1,111



1,065



1,133


    Amortization of intangible assets


921



922



921



921



921


    Insurance expense


1,433



1,479



1,261



2,013



2,064


    Professional fees


412



879



1,215



765



1,220


    Advertising expense


664



395



1,322



565



390


    Problem loan costs


1,866



1,506



1,863



3,107



1,923


    Real estate owned expense (income), net


108



448



635



(5)



398


    Office supplies expense


323



315



324



345



338


    Other expense


1,869



1,432



1,499



934



1,965


       Total non-interest expense


27,226



26,973



28,244



27,782



27,949


(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.


(3)  Amount consists of items which the Company believes are not a result of normal operations.






SUN BANCORP, INC. AND SUBSIDIARIES


AVERAGE BALANCE SHEETS (Unaudited)

(Dollars in thousands)







 For the Three Months Ended December 31,



2011



2010



Average


Income/


Yield/



Average


Income/


Yield/



Balance


Expense


Cost



Balance


Expense


Cost


Interest-earning assets:














Loans receivable (1),(2):














Commercial and industrial

$

1,910,635


$

22,542



4.72

%


$

2,184,212



25,654



4.70

%

Home equity


226,345



2,348



4.15




241,510



2,744



4.54


Second mortgage


44,600



656



5.88




57,310



869



6.07


Residential real estate


111,514



1,338



4.80




88,144



1,179



5.35


Other


46,248



794



6.87




57,522



969



6.74


Total loans receivable


2,339,342



27,678



4.73




2,628,698



31,415



4.78


Investment securities(3)


548,355



3,375



2.46




491,588



4,216



3.43


Interest-earning bank balances


54,130



34



0.25




166,425



105



0.25


Total interest-earning assets


2,941,827



31,087



4.23




3,286,711



35,736



4.35


Non-interest earning assets:




















 Cash and due from banks


73,863










47,492








 Bank properties and equipment, net


55,264










53,018








 Goodwill and intangible assets, net


45,586










49,402








 Other assets


113,159










146,024








Total non-interest-earning assets


287,872










295,936








Total assets

$

3,229,699









$

3,582,647




























Interest-bearing liabilities:




















Interest-bearing deposit accounts:




















Interest-bearing demand deposits

$

1,271,991



1,435



0.45

%



1,387,423



2,581



0.74

%

Savings deposits


265,115



285



0.43




281,401



510



0.72


Time deposits


633,108



2,321



1.47




854,677



3,566



1.67


Total interest-bearing deposit accounts


2,170,214



4,041



0.74




2,523,501



6,657



1.06


Short-term borrowings:




















Federal funds purchased


141



-



-




-



-



-


Securities sold under agreements to repurchase - customers


5,906



1



0.07




14,457



8



0.22


Long-term borrowings:




















FHLBNY advances (4)


17,842



219



4.91




19,102



246



5.15


Obligation under capital lease


7,897



131



6.64




8,138



138



6.78


Junior subordinated debentures


92,786



695



3.00




92,786



1,032



4.45


Total borrowings


124,572



1,046



3.36




134,483



1,424



4.24


Total interest-bearing liabilities


2,294,786



5,087



0.89




2,657,984



8,081



1.22


Non-interest bearing liabilities:




















 Non-interest-bearing demand deposits


536,558










509,093








 Other liabilities


87,569










118,452








Total non-interest bearing liabilities


624,127










627,545








Total liabilities


2,918,913










3,285,529








Shareholders' equity 


310,786










297,118








Total liabilities and shareholders' equity

$

3,229,699









$

3,582,647




























Net interest income




$

26,000









$

27,655





Interest rate spread (5)








3.34

%









3.13

%

Net interest margin (6)








3.54

%









3.37

%

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








128.20

%









123.65

%



(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, 2011 and 2010 were $271 thousand and $382 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,



2011



2010



Average


Income/


Yield/



Average


Income/


Yield/



Balance


Expense


Cost



Balance


Expense


Cost


Interest-earning assets:














Loans receivable (1),(2):














Commercial and industrial

$

1,954,701



92,107



4.71

%


$

2,245,118


$

105,210



4.69

%

Home equity


232,278



9,774



4.21




251,599



11,714



4.66


Second mortgage


48,998



2,863



5.84




62,349



3,889



6.24


Residential real estate


87,858



4,547



5.18




79,547



4,415



5.55


Other


51,041



3,502



6.86




60,874



4,163



6.84


Total loans receivable


2,374,876



112,793



4.75




2,699,487



129,391



4.79


Investment securities (3)


505,006



14,940



2.96




452,365



17,846



3.95


Interest-earning bank balances


117,830



288



0.24




69,803



166



0.24


Total interest-earning assets


2,997,712



128,021



4.27




3,221,655



147,403



4.58


Non-interest earning assets:




















 Cash and due from banks


72,455










47,393








 Bank properties and equipment, net


54,589










52,944








 Goodwill and intangible assets, net


46,961










95,010








 Other assets


114,158










150,558








Total non-interest-earning assets


288,163










345,905








Total assets

$

3,285,875









$

3,567,560




























Interest-bearing liabilities:




















Interest-bearing deposit accounts:




















Interest-bearing demand deposits

$

1,317,816


$

7,024



0.53

%


$

1,312,871


$

10,692



0.81

%

Savings deposits


271,970



1,412



0.52




295,121



2,283



0.77


Time deposits


675,464



10,301



1.53




899,038



15,805



1.76


Total interest-bearing deposit accounts


2,265,250



18,737



0.83




2,507,030



28,780



1.15


Short-term borrowings:




















Federal funds purchased


36



-



-




16,907



89



0.53


Securities sold under agreements to repurchase - customers


6,681



7



0.10




16,069



30



0.18


Long-term borrowings:




















FHLBNY advances (4)


18,316



884



4.83




22,710



1,076



4.74


Obligations under capital lease


7,988



527



6.60




8.212



550



6.70


Junior subordinated debentures


92,786



2,997



3.23




92,786



4,117



4.44


Total borrowings


125,807



4,415



3.51




156,684



5,861



3.74


Total interest-bearing liabilities


2,391,057



23,152



0.97




2,663,714



34,641



1.30


Non-interest bearing liabilities:




















 Non-interest-bearing demand deposits


509,678










481,757








 Other liabilities


86,013










96,420








Total non-interest bearing liabilities


595,691










578,177








Total liabilities


2,986,748










3,241,891








Shareholders' equity 


299,127










325,669








Total liabilities and shareholders' equity

$

3,285,875









$

3,567,560




























Net interest income




$

104,869










112,762





Interest rate spread (5)








3.30

%









3.28

%

Net interest margin (6)








3.50

%









3.50

%

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








125.37

%









120.95

%



(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 twelve months ended December 31, 2011 and 2010 were $1.3 million and $1.8 million, 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



December 31, 2011



September 30, 2011



Average


Income/


Yield/



Average


Income/


Yield/



Balance


Expense


Cost



Balance


Expense


Cost


Interest-earning assets:














Loans receivable (1),(2):














Commercial and industrial

$

1,910,635



22,542



4.72

%



1,901,394


$

23,028



4.84

%

Home equity


226,345



2,348



4.15




232,458



2,418



4.16


Second mortgage


44,600



656



5.88




47,844



698



5.84


Residential real estate


111,514



1,338



4.80




89,010



1,161



5.22


Other


46,248



794



6.87




49,361



844



6.84


Total loans receivable


2,339,342



27,678



4.73




2,320,067



28,149



4.85


Investment securities (3)


548,355



3,375



2.46




498,329



3,582



2.88


Interest-earning bank balances


54,130



34



0.25




118,350



71



0.24


Total interest-earning assets


2,941,827



31,087



4.23




2,936,746



31,802



4.33


Non-interest earning assets:




















 Cash and due from banks


73,863










72,744








 Bank properties and equipment, net


55,264










55,461








 Goodwill and intangible assets, net


45,586










46,511








 Other assets


113,159