Sun Bancorp, Inc. Announces Fourth Quarter 2015 Net Income of $1.5 Million; Full Year 2015 Net Income of $10.2 Million

Feb 01, 2016, 08:45 ET from Sun Bancorp, Inc.

MOUNT LAUREL, N.J., Feb. 1, 2016 /PRNewswire/ --

Fourth Quarter Highlights:

  • Net income of $1.5 million, or $0.08 per diluted share, for the quarter ended December 31, 2015.
  • Quarterly operating expenses of $16.6 million are the lowest in more than 10 years.
  • Annualized commercial loan growth of 12% in the fourth quarter.
  • Completed comprehensive restructuring plan in 2015 and recently announced the termination of the formal written agreement with the Office of the Comptroller of the Currency.
  • Non-performing loans fell to $3.1 million, or 0.2% of total loans, at December 31, 2015 from $11.0 million, or 0.73% of total loans, at December 31, 2014.
  • Solid foundation in place with strong capital ratios and reserve coverage with allowance for loan losses to loans of 1.16% and allowance for loan losses to non-performing loans at 578%.
  • Net income of $10.2 million for 2015, or $0.55 per diluted share, represents first annual profit since 2008.

Sun Bancorp, Inc. (NASDAQ: SNBC), (the "Company"), the holding company for Sun National Bank (the "Bank"), today reported net income of $1.5 million, or $0.08 per diluted share, for the quarter ended December 31, 2015, compared to net income of $3.2 million, or $0.17 per diluted share in the quarter ended September 30, 2015, and a $2.8 million net loss, or $0.15 loss per diluted share for the quarter ended December 31, 2014.

"The fourth quarter and full year 2015 results clearly demonstrate that the successful execution of the strategic restructuring undertaken in the last 18 months has led to substantial progress, including reporting profitable operating results in each quarter of 2015," said Thomas M. O'Brien, President and CEO.  "We have been relentless in our efforts to address and remediate the legacy regulatory, operating and financial problems at the Company.  As a result of these successful efforts, our long-standing formal written agreement with the Office of the Comptroller of the Currency (the "OCC") has recently been terminated.  Our goal remains focused on building a franchise that operates in full regulatory compliance while delivering value for our investors."

Discussion of Results:

Balance Sheet

Total assets decreased to $2.21 billion at December 31, 2015, as compared to $2.29 billion at September 30, 2015 and $2.72 billion at December 31, 2014. Cash and cash equivalents decreased to $204.3 million at December 31, 2015 as compared to $287.9 million at September 30, 2015 and $548.4 million at December 31, 2014.  The decrease in cash and cash equivalents for 2015 was primarily due to increases in loan originations, purchases of several multifamily loan participations and deposit reductions from the completion of the sale of eight branch locations throughout 2015.

Gross loans held-for-investment totaled $1.55 billion at December 31, 2015, as compared to $1.53 billion at September 30, 2015 and $1.51 billion at December 31, 2014.  The increase in gross loans held-for-investment during the fourth quarter is due primarily to an increase in commercial loan originations. Commercial loan growth totaled 12% on an annualized basis in the fourth quarter as originations increased from third quarter levels.  For the year, the Bank has experienced net loan growth both through organic originations as well as through purchases of multifamily loan participations and strategically retaining loans where the Bank has the opportunity to build long-term relationships. 

"We now have several quarters of successful originations from our new commercial lending platform which provided an increase in commercial loan originations for the first time in many years," said O'Brien.  "Despite a very competitive commercial loan market, with our highly experienced commercial lending teams firmly in place, we continue to see quality relationship opportunities.  While the bulk of our originations were in commercial real estate, we have enhanced several commercial & industrial loan relationships, and it is our desire to grow in this segment.  Strategically, we continued to reduce our consumer, residential and investment portfolios in 2015 and reinvest the proceeds into commercial loans."

"New commercial loan originations were primarily in the Central and Northern New Jersey markets, as well as the metropolitan New York City area including Long Island," stated O'Brien.  "Our goal has been to position the Bank for organic growth in high-potential markets.  With the Bank's exit from Cape May and Salem Counties in 2015, as well as the previously completed relocation of the Company headquarters to Burlington County and the establishment of our commercial lending hub in Edison, New Jersey, more than 60% of our commercial loan relationships are based out of the New York City, Northern New Jersey, Long Island and Central New Jersey metropolitan statistical areas." 

Deposits were $1.74 billion at December 31, 2015, as compared to $1.82 billion at September 30, 2015 and $2.09 billion at December 31, 2014. The Bank experienced deposit reductions in the fourth quarter due to runoff from previously consolidated branches, a planned loss of one high balance non-transactional commercial deposit relationship and mild runoff of multiple low balance, non-relationship accounts due to the implementation of a revised relationship-based retail deposit and pricing strategy. 

"Our deposit strategy is to lessen volatility and costs associated with excessive low-balance single product accounts," said O'Brien.  "We anticipate deposit growth in future periods and our general target is a loan-to-deposit ratio in the 95% range.  Our overall deposit strategy continues to be growing core relationship balances while reducing high-cost or rate-sensitive balances."

Net Interest Income and Margin

The net interest margin of 2.81% for the quarter ended December 31, 2015 was unchanged from the linked third quarter.  Net interest income fell by $0.4 million to $14.8 million in the fourth quarter, compared to the linked third quarter, due to a reduction in interest-earning assets.  Average loans fell during the fourth quarter due mainly to high commercial loan payoffs late in the third quarter and originations primarily occurring late in the fourth quarter.  Average investments fell in the fourth quarter due to the third quarter sale of the municipal bond portfolio, normal amortization and limited reinvestment.  Average cash was approximately $308 million during the fourth quarter which continued to depress the net interest margin. 

"With the restructuring completed and the recent termination of the formal written agreement with the OCC, we will continue to enhance our efforts around liquidity deployment," said O'Brien.  "Once our liquidity is fully deployed, we anticipate a net interest margin between 3.1% and 3.2%.  We expect that recent movement in short-term interest rates will benefit our margins mildly as the Bank continues to maintain an asset sensitive position." 

Non-Interest Income

Non-interest income totaled $3.2 million for the quarter ended December 31, 2015, as compared to $6.5 million and $4.1 million for the quarters ended September 30, 2015 and December 31, 2014, respectively.  The decrease in non-interest income for the fourth quarter of 2015 as compared to the linked third quarter was primarily attributable to a $1.5 million gain on the sale of investment securities and a $1.3 million gain on the sale of the Hammonton branch location, which both occurred in the third quarter of 2015.  The decrease from the comparable prior year quarter was primarily due to a decline of $1.0 million in deposit service charges and fees.  This decline was substantially due to the branch sale transactions and branch office consolidations that were completed throughout 2015 and changes in the retail deposit strategy.   

"As we began to implement our relationship product and pricing strategies in the second half of 2015, the overall composition of our deposit-related fee income began to shift," said O'Brien.  "We are beginning to generate increased recurring transactional fee income as a result of our customers deepening their relationship with us.  As we make this transition, we anticipate that our deposit-related fee income may fluctuate through the first part of 2016." 

Non-Interest Expense

Non-interest expense for the fourth quarter of 2015 was $16.6 million, a decrease of $3.3 million from the third quarter of 2015 and a decrease of $7.1 million from the fourth quarter of 2014.  In the fourth quarter of 2015, expenses from salaries and employee benefits declined by $1.7 million, compared to the third quarter of 2015, as a result of the consolidation and sale of ten branch locations that were completed in the third quarter and an incentive accrual reversal of $0.5 million in the fourth quarter of 2015 as certain executives will receive deferred compensation in lieu of cash compensation.  Occupancy expense decreased by $1.8 million in the fourth quarter of 2015, compared to the third quarter of 2015, as the Company recorded $0.4 million in expenses related to lease vacancies during the third quarter of 2015 and recorded approximately $0.6 million of lease vacancy expense reversals in the fourth quarter of 2015 due to the execution of three new sub-lease agreements for vacant office space.  There was an overall reduction in occupancy expense due to the reduction in branch locations.  In the three months ended December 31, 2015, other expense included $0.7 million of expenses for recourse reserves on certain SBA loans sold several years previously.  In comparison to the comparable prior year quarter, occupancy expense and expenses from salaries and employee benefits decreased by $3.9 million and $1.6 million, respectively, due to a significant reduction in branch locations.  Other expenses in the comparable prior year quarter included a $0.8 million write down on one other real estate owned property.

"With the recent termination of the long-standing formal written agreement with the OCC, we anticipate further expense reductions as costs directly attributable to the order cease," said O'Brien.  "Specifically, we anticipate expense reductions in FDIC insurance, exam and regulatory fees, and professional fees.  With our quarterly operating expenses approaching a more appropriate level, we will focus on reducing our historically high efficiency ratio through continued expense discipline and revenue growth initiatives.  For the last several years, the Company's efficiency ratio was consistently well over 100%.  While the Company's efficiency ratio fell to 92% for the fourth quarter of 2015, it remains unacceptably high and a target for our continued focus.  We anticipate more progress on future reductions through improved revenue generation as well as careful expense management."

Asset Quality

Asset quality continues to be strong as the Bank aggressively monitors and minimizes the risks in its loan portfolio.  Non-performing loans held-for-investment decreased to $3.1 million at December 31, 2015 from $3.7 million at September 30, 2015 and $11.0 million at December 31, 2014.  Non-performing loans held-for-investment to total gross loans held-for-investment declined to 0.20% at December 31, 2015 as compared to 0.24% at September 30, 2015 and 0.73% at December 31, 2014. 

There was a negative provision for loan losses of $0.3 million during the fourth quarter of 2015 compared to a negative provision for loan losses of $1.8 million in the third quarter of 2015 and no provision for loan losses in the fourth quarter of 2014.  In the fourth quarter of 2015, the Bank recorded net charge-offs of $0.6 million as compared to net recoveries of $0.3 million in the third quarter of 2015, and net charge-offs of $3.3 million in the fourth quarter of 2014.  During the fourth quarter of 2015, the Bank sold $1.3 million of problem consumer residential loans from its held-for-investment portfolio resulting in charge-offs of approximately $700 thousand with respect to the sale.  The allowance for loan losses was $18.0 million, or 1.16% of gross loans held-for-investment, at December 31, 2015, as compared to $18.9 million, or 1.24% of gross loans held-for-investment, at September 30, 2015 and $23.2 million, or 1.54% of gross loans held-for-investment, at December 31, 2014. The allowance for loan losses was 578% of non-performing loans held-for-investment at December 31, 2015 as compared to 210% at December 31, 2014.

Capital

The capital ratios of the Bank and the Company remain strong.  At December 31, 2015, the Bank's Tier 1 common equity risk-based capital ratio, total risk-based capital ratio, Tier 1 risk-based capital ratio and leverage capital ratio were 17.9%, 19.1%, 17.9% and 12.4%, respectively.  At December 31, 2015, the Company's Tier 1 common equity risk-based capital ratio, total risk-based capital ratio, Tier 1 risk-based capital ratio and leverage capital ratio were 14.1%, 21.0%, 17.6%, and 12.2%, respectively.  The Company's tangible equity to tangible assets ratio was 10.0% at December 31, 2015, as compared to 9.7% at September 30, 2015 and 7.7% at December 31, 2014. 

"The Company and the Bank continue to enjoy a very solid capital base with ratios that significantly exceed all of the "well capitalized" regulatory standards," said O'Brien.  "With the formal written agreement now terminated by the OCC, these healthy capital ratios will allow the Company to begin to evaluate a variety of capital management options.  The Company expects to continue its focus on organic growth opportunities as it looks to build a record of consistent profitability.  The work ahead of us is much different than the major restructuring undertaken over the past 18 months.  As we embark on 2016, our attention will be directed to improving both the quality and quantity of our earnings in each quarter of the year."

Conference Call

The Company will hold a conference call on Monday, February 1, 2016 at 11:00 a.m. (EST) to discuss results and answer questions from analysts and investors.  Participants may listen to or participate in the Company's earnings conference call via the following:

  • Participants Toll-Free Number: 800-753-0487
  • Conference ID: 2576746

A transcript of the conference call will be available at the Investor Relations section of www.sunnationalbank.com following the call.

About Sun Bancorp, Inc.

Sun Bancorp, Inc. (NASDAQ: SNBC) is a $2.21 billion asset bank holding company headquartered in Mount Laurel, New Jersey. Its primary subsidiary is Sun National Bank, a community bank serving customers throughout New Jersey, and the metro New York region. Sun National 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.sunnationalbank.com.

Cautionary Note Regarding Forward-Looking Statements

The foregoing material contains forward-looking statements, as defined in the Private Securities Litigation Reform Act of 1995, which may be identified by the use of such words as "allow," "anticipate," "believe," "continues," "could," "estimate," "expect," "intend," "may," "opportunity," "outlook," "plan," "potential," "predict," "project," "reflects," "should," "typically," "usually," "view," "will," "would," and similar terms and phrases, including references to assumptions.  Examples of forward-looking statements include, but are not limited to, estimates with respect to the financial condition, results of operations and business of the Company and the Bank, the banking industry, the economy in general, expectations of the business environment in which the Company operates, projections of future performance and other statements contained herein that are not historical facts.  These remarks are based upon current management expectations, and may, therefore, involve risks and uncertainties that cannot be predicted or quantified and are beyond the Company's control and are subject to a variety of uncertainties that could cause future results to vary materially from the Company's historical performance, or from current expectations.  Factors that could cause actual results to differ from those expressed or implied by such forward-looking statements include, but are not limited to: (i) the Company's ability to attract and retain key management and staff; (ii) changes in business strategy or an inability to successfully execute strategy due to the occurrence of unanticipated events; (iii) the ability to attract deposits and other sources of liquidity; (iv) changes in the financial performance and/or condition of the Bank's borrowers; (v) changes in consumer spending, borrowing and saving habits; (vi) the ability to increase market share and control expenses; (vii) changes in estimates of future loan loss reserve requirements based upon the periodic review thereof under relevant regulatory and accounting requirements; (viii) local, regional and national economic conditions and events and the impact they may have on the Company and its customers; (ix) volatility in the credit and equity markets and its effect on the general economy; (x) the credit risks of lending activities, including changes in the level and trend of loan delinquencies and write-offs; (xi) the overall quality of the composition of the Company's loan and securities portfolios; (xii) inflation, interest rate, securities market and monetary fluctuations; (xiii) legislative and regulatory changes, including the Dodd-Frank Wall Street Reform and Consumer Protection Act and the implementing regulations, changes in banking, securities and tax laws and regulations and their application by regulators and changes in the scope and cost of the Federal Deposit Insurance Corporation insurance and other coverages; (xiv) the effects of, and changes in, monetary and fiscal policies and laws, including interest rate policies of the Board of Governors of the Federal Reserve System; (xv) competition among providers of financial services; (xvi) other economic, competitive, governmental, regulatory and technological factors affecting our operations, pricing, products and services and the other risks detailed under the headings "Risk Factors" and "Management's Discussion and Analysis of Financial Condition and Results of Operations" in the Company's Form 10-K for the fiscal year ended December 31, 2014, the Company's Form 10-Q for the quarters ended March 31, 2015, June 30, 2015 and September 30, 2015 and in other filings made pursuant to the Securities Exchange Act of 1934, as amended.  No undue reliance should be placed 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 such forward-looking statements to reflect the occurrence of anticipated or unanticipated events or circumstances after the date of such statements.

Non-GAAP Financial Measures (Unaudited)

This news release references tangible book value per common share and return on average tangible equity, which are non-GAAP financial measures. Management believes that tangible book value per common share and return on average tangible equity are meaningful financial measures because they are two of the measures we use to assess capital adequacy.

Tangible book value per common share (dollars in thousands)

The following reconciles shareholders' equity to tangible equity by reducing shareholders' equity by the intangible asset balance at December 31, 2015, September 30, 2015, June 30, 2015, March, 31, 2015 and December 31, 2014.

 

December 31, 2015

September 30, 2015

June 30, 2015

March 31, 2015

December 31, 2014

Tangible book value per common share:

Shareholders' equity

$

256,389

$

255,485

$

252,926

$

249,235

$

245,323

Less: Intangible assets

38,188

38,188

38,188

38,188

38,188

Tangible equity

$

218,201

$

217,297

$

214,738

$

211,047

$

207,135

Common stock

18,907

18,901

18,901

18,901

18,901

Less: Treasury stock

218

231

237

282

285

Total outstanding shares

18,689

18,670

18,664

18,619

18,616

Tangible book value per common share:

$

11.68

$

11.64

$

11.51

$

11.34

$

11.13

 

Return on Average Tangible Equity (dollars in thousands)

The following provides the calculation of return on tangible equity for the three months ended December 31, 2015, September 30, 2015, June 30, 2015, March 31, 2015 and December 31, 2014.

 

Three Months Ended

December 31, 2015

September 30, 2015

June 30, 2015

March 31, 2015

December 31, 2014

Net income (loss)

$

1,452

$

3,164

$

2,828

$

2,776

$

(2,829)

Average tangible equity:

Average shareholders' equity

$

257,035

$

255,685

$

252,391

$

249,970

$

249,313

Less: Average intangible assets

38,188

38,188

38,188

38,188

38,188

Average tangible equity

$

218,847

$

217,497

$

214,203

$

211,782

$

211,125

Return on average tangible equity(1):

2.7

%

5.8

%

5.3

%

5.2

%

(5.4)

%

(1)       Annualized

 

SUN BANCORP, INC AND SUBSIDIARIES

FINANCIAL HIGHLIGHTS (Unaudited)

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

For the Three Months Ended

For the Year Ended

December 31,

December 31,

2015

2014

2015

2014

Profitability for the period:

Net interest income

$

14,815

$

17,026

$

60,598

$

77,951

Provision for loan losses

(300)

-

(3,280)

14,803

Non-interest income

3,204

4,142

27,625

17,763

Non-interest expense

16,621

23,705

80,087

109,402

Income (loss) before income taxes

1,698

(2,537)

11,416

(28,491)

Income tax expense

246

292

1,197

1,317

Net income (loss) available to common shareholders

$

1,452

$

(2,829)

$

10,219

$

(29,808)

Financial ratios:

Return on average assets (1)

0.3

%

(0.4)

%

0.4

%

(1.0)

%

Return on average equity (1)

2.3

%

(4.5)

%

4.7

%

(12.0)

%

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

2.7

%

(5.4)

%

4.7

%

(14.1)

%

Net interest margin (1)

2.81

%

2.67

%

2.74

%

2.92

%

Efficiency ratio

92

%

110

%

91

%

110

%

Income (loss) per common share:

Basic

$

0.08

$

(0.15)

$

0.55

$

(1.67)

Diluted

$

0.08

$

(0.15)

$

0.55

$

(1.67)

Average equity to average assets

11.2

%

9.0

%

10.5

%

8.5

%

December 31,

2015

2014

At period-end:

Total assets

$

2,208,828

$

2,715,348

Total deposits

1,744,217

2,091,904

Loans receivable, net of allowance for loan losses

1,530,501

1,486,898

Loans held-for-sale

-

4,083

Investments

298,859

409,950

Borrowings

92,305

68,978

Junior subordinated debentures

92,786

92,786

Shareholders' equity

256,389

245,323

Credit quality and capital ratios:

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

1.16

%

1.54

%

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

0.20

%

0.73

%

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

0.22

%

1.03

%

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

578

%

210

%

Tier 1 common equity risk-based capital (3)(4):

Sun Bancorp, Inc.

14.1

%

-

Sun National Bank

17.9

%

-

Total risk-based capital (3):

Sun Bancorp, Inc.

21.0

%

19.3

%

Sun National Bank

19.1

%

17.4

%

Tier 1 risk-based capital (3):

Sun Bancorp, Inc.

17.6

%

16.7

%

Sun National Bank

17.9

%

16.1

%

Leverage capital (3):

Sun Bancorp, Inc.

12.2

%

10.1

%

Sun National Bank

12.4

%

9.7

%

Book value per common share

$

13.72

$

13.18

Tangible book value per common share

$

11.68

$

11.13

(1)

Amounts for the three months ended are annualized.

(2)

Return on average tangible equity, a non-GAAP measure, 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)

December 31, 2015 capital ratios are estimated, subject to regulatory filings.

(4)

The Basel III guidelines and the Dodd-Frank Act established a new minimum Tier 1 common equity risk-based capital ratio, effective January 1, 2015.

 

SUN BANCORP, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION (Unaudited)

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

December 31,

December 31,

2015

2014

ASSETS

Cash and due from banks

$

21,836

$

42,548

Interest earning bank balances

182,479

505,885

Cash and cash equivalents

204,314

548,433

Restricted cash

5,000

13,000

Investment securities available for sale (amortized cost of $285,838 and $394,733 at December 31, 2015 and December 31, 2014, respectively)

282,875

394,500

Investment securities held to maturity (estimated fair value of $250 and $501 at December 31, 2015 and December 31, 2014, respectively)

250

489

Loans receivable (net of allowance for loan losses of $18,007 and $23,246 at December 31, 2015 and December 31, 2014, respectively)

1,530,501

1,486,898

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

4,083

Branch assets held-for-sale

69,064

Restricted equity investments, at cost

15,733

14,961

Bank properties and equipment, net

31,596

40,155

Real estate owned, net

281

522

Accrued interest receivable

4,657

5,397

Goodwill

38,188

38,188

Bank owned life insurance (BOLI)

81,175

79,132

Other assets

14,257

20,526

Total assets

$

2,208,828

$

2,715,348

LIABILITIES AND SHAREHOLDERS' EQUITY

Liabilities:

Deposits

$

1,744,217

$

2,091,904

Branch deposits held-for-sale

183,395

Securities sold under agreements to repurchase - customers

1,156

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

85,607

60,787

Obligation under capital lease

6,698

7,035

Junior subordinated debentures

92,786

92,786

Deferred taxes, net

1,524

1,514

Other liabilities

21,607

31,448

Total liabilities

1,952,439

2,470,025

SHAREHOLDERS' EQUITY

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

Common stock, $5 par value, 40,000,000 shares authorized; 18,906,527 shares issued and 18,688,789 shares outstanding at December 31, 2015; 18,900,877 shares issued and 18,615,950 shares outstanding at December 31, 2014.

94,532

94,508

Additional paid in capital

510,681

514,071

Retained deficit

(337,541)

(347,762)

Accumulated other comprehensive loss

(1,752)

(138)

Deferred compensation plan trust

(1,122)

(599)

Treasury stock at cost, 217,738 shares at December 31, 2015 and 284,927 shares December 31, 2014.

(8,409)

(14,757)

Total shareholders' equity

256,389

245,323

Total liabilities and shareholders' equity

$

2,208,828

$

2,715,348

 

SUN BANCORP, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF OPERATIONS (Unaudited)

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

For the Three Months Ended

For the Year Ended

December 31,

December 31,

2015

2014

2015

2014

INTEREST INCOME:

Interest and fees on loans

$

15,243

$

17,204

$

61,271

$

79,427

Interest on taxable investment securities

1,719

2,132

7,268

8,715

Interest on non-taxable investment securities

309

851

1,232

Dividends on restricted equity investments

205

195

818

838

Total interest income

17,167

19,840

70,208

90,212

INTEREST EXPENSE:

Interest on deposits

1,231

1,832

5,337

8,358

Interest on funds borrowed

553

439

2,073

1,753

Interest on junior subordinated debt

568

543

2,200

2,150

Total interest expense

2,352

2,814

9,610

12,261

Net interest income

14,815

17,026

60,598

77,951

PROVISION FOR LOAN LOSSES

(300)

(3,280)

14,803

Net interest income after provision for loan losses

15,115

17,026

63,878

63,148

NON-INTEREST INCOME:

Deposit service charges and fees

1,424

2,383

6,988

9,782

Interchange fees

505

540

2,115

2,357

Gain on sale of bank branches

10,553

Gain on sale of loans

1,444

Gain on sale of investment securities

1,468

50

Investment products income

458

480

2,025

2,447

BOLI income

516

482

2,043

1,896

Other income

301

257

989

1,231

Total non-interest income

3,204

4,142

27,625

17,763

NON-INTEREST EXPENSE:

Salaries and employee benefits

7,814

9,412

37,013

51,814

Occupancy expense

1,521

5,432

12,811

16,230

Equipment expense

1,395

1,487

8,417

7,287

Data processing expense

1,209

1,202

5,018

4,979

Professional fees

845

1,225

3,230

6,487

Insurance expense

1,049

1,299

4,528

5,567

Advertising expense

541

386

1,520

2,062

Problem loan expense

167

547

1,259

2,039

Other expense

2,080

2,715

6,290

12,937

Total non-interest expense

16,621

23,705

80,086

109,402

INCOME (LOSS) BEFORE INCOME TAXES

1,698

(2,537)

11,417

(28,491)

INCOME TAX EXPENSE

246

292

1,197

1,317

NET INCOME (LOSS) AVAILABLE TO COMMON

   SHAREHOLDERS

$

1,452

$

(2,829)

$

10,220

$

(29,808)

Basic earnings (loss) per share

$

0.08

$

(0.15)

$

0.55

$

(1.67)

Diluted earnings (loss) per share

$

0.08

$

(0.15)

$

0.55

$

(1.67)

Weighted average shares - basic

18,673,271

18,589,717

18,647,184

17,830,018

Weighted average shares - diluted

18,766,028

18,589,717

18,708,168

17,830,018

 

SUN BANCORP, INC. AND SUBSIDIARIES

HISTORICAL TRENDS IN QUARTERLY FINANCIAL DATA (Unaudited)

(dollars in thousands)

2015

2015

2015

2015

2014

Q4

Q3

Q2

Q1

Q4

Profitability for the quarter:

Net interest income

$

14,815

$

15,217

$

15,375

$

15,191

$

17,026

Provision for loan losses

(300)

(1,762)

(1,218)

-

-

Non-interest income

3,204

6,453

4,881

13,087

4,142

Non-interest expense

16,621

19,885

18,362

25,218

23,705

Income (loss) before income taxes

1,698

3,547

3,112

3,060

(2,537)

Income tax expense

246

383

284

284

292

Net income (loss) available to common shareholders

$

1,452

$

3,164

$

2,828

$

2,776

$

(2,829)

Financial ratios:

Return on average assets (1)

0.3

%

0.5

%

0.5

%

0.4

%

(0.4)

%

Return on average equity (1)

2.3

%

5.0

%

5.0

%

4.4

%

(4.5)

%

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

2.7

%

5.8

%

5.3

%

5.2

%

(5.4)

%

Net interest margin (1)

2.81

%

2.81

%

2.79

%

2.57

%

2.67

%

Efficiency ratio

92

%

92

%

90

%

89

%

112

%

Per share data :

Income (loss) per common share:

Basic

$

0.08

$

0.17

$

0.15

$

0.15

$

(0.15)

Diluted

$

0.08

$

0.17

$

0.15

$

0.15

$

(0.15)

Book value

$

13.72

$

13.68

$

13.55

$

13.39

$

13.18

Tangible book value

$

11.68

$

11.64

$

11.51

$

11.34

$

11.13

Average basic  shares

18,673,271

18,668,791

18,632,526

18,616,537

18,589,717

Average diluted shares

18,766,028

18,738,517

18,684,597

18,639,501

18,589,717

Non-interest income:

Deposit service charges and fees

$

1,424

$

1,711

$

1,849

$

2,004

$

2,383

Interchange fees

505

512

554

544

540

Gain on sale of investment securities

-

1,466

2

-

-

Gain on sale of loans

-

205

1,226

13

-

Net gain on sale of bank branches

-

1,318

-

9,235

-

Investment products income

458

490

488

589

480

BOLI income

516

512

503

512

482

Other income

301

239

259

190

257

Total non-interest income

$

3,204

$

6,453

$

4,881

$

13,087

$

4,142

Non-interest expense:

Salaries and employee benefits

$

7,814

$

9,489

$

9,120

$

10,590

$

9,412

Occupancy expense

1,521

3,289

3,034

4,967

5,432

Equipment expense

1,395

2,008

1,500

3,514

1,487

Data processing expense

1,209

1,197

1,304

1,308

1,202

Professional fees

845

838

711

836

1,225

Insurance expense

1,049

1,138

1,094

1,247

1,299

Advertising expense

541

521

223

235

386

Problem loan expenses

167

66

38

988

547

Other expenses

2,080

1,339

1,338

1,533

2,715

Total non-interest expense

$

16,621

$

19,885

$

18,362

$

25,218

$

23,705

(1)

Annualized.

(2)

Return on average tangible equity, a non-GAAP measure, 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

HISTORICAL TRENDS IN QUARTERLY FINANCIAL DATA (Unaudited)

(dollars in thousands)

2015

2015

2015

2015

2014

Q4

Q3

Q2

Q1

Q4

Balance Sheet at quarter end:

Cash and cash equivalents

$

204,314

$

287,863

$

278,863

$

388,021

$

548,433

Restricted cash

5,000

5,000

5,000

13,000

13,000

Investment securities

298,858

313,216

353,245

367,178

409,950

Loans held-for-investment

Commercial

1,152,643

1,119,088

1,155,689

1,042,820

1,052,932

Home equity

130,401

133,324

139,789

145,806

156,926

Residential real estate

262,358

270,855

280,009

288,783

294,232

Other

3,107

4,914

3,443

6,763

6,054

Total loans

1,548,509

1,528,181

1,578,930

1,484,172

1,510,144

Allowance for loan losses

(18,008)

(18,913)

(20,331)

(20,917)

(23,246)

Net loans

1,530,501

1,509,268

1,558,599

1,463,255

1,486,898

Loans held-for-sale

-

-

2,006

4,766

4,083

Branch assets held-for-sale

-

-

5,604

5,419

69,064

Goodwill

38,188

38,188

38,188

38,188

38,188

Total assets

2,208,828

2,289,023

2,379,023

2,436,391

2,715,348

Total deposits

1,744,217

1,819,532

1,876,721

1,959,556

2,091,904

Branch deposits held-for-sale

-

-

34,689

33,381

183,395

Securities repurchase agreements- customers

-

-

-

156

1,156

Advances from the FHLBNY

85,607

85,653

85,698

60,743

60,787

Obligations under capital leases

6,698

6,795

6,880

6,958

7,035

Junior subordinated debentures

92,786

92,786

92,786

92,786

92,786

Total shareholders' equity

256,389

255,483

252,926

249,235

245,323

Quarterly average balance sheet:

Loans held-for-investment

Commercial and industrial

$

1,124,176

$

1,147,236

$

1,095,202

$

1,051,610

$

1,145,297

Home equity

145,106

152,201

161,698

183,753

196,841

Residential real estate

255,746

264,396

271,585

284,197

301,326

Other

1,700

1,923

2,122

3,233

3,391

Total loans

1,526,728

1,565,756

1,530,607

1,522,793

1,646,855

Securities and other interest-earning assets

583,541

619,430

699,687

867,633

923,909

Total interest-earning assets

2,110,269

2,185,186

2,230,294

2,390,426

2,570,764

Total assets

2,293,114

2,372,727

2,419,520

2,600,231

2,785,525

Non-interest-bearing demand deposits

534,551

550,689

521,563

559,793

608,396

Total deposits

1,826,704

1,904,400

1,956,592

2,162,142

2,331,934

Total interest-bearing liabilities

1,477,301

1,539,000

1,617,176

1,763,062

1,885,250

Total shareholders' equity

257,035

255,685

252,391

249,970

249,313

Capital and credit quality measures:

Tier 1 common equity risk-based capital (2,3):

Sun Bancorp, Inc.

14.1

%

14.6

%

13.8

%

13.4

%

-

Sun National Bank

17.9

%

18.5

%

17.5

%

17.2

%

-

Total risk-based capital (2):

Sun Bancorp, Inc.

21.0

%

21.8

%

20.8

%

20.4

%

19.3

%

Sun National Bank

19.1

%

19.7

%

18.8

%

18.4

%

17.4

%

Tier 1 risk-based capital (2):

Sun Bancorp, Inc.

17.6

%

18.2

%

17.2

%

16.8

%

16.7

%

Sun National Bank

17.9

%

18.5

%

17.5

%

17.1

%

16.1

%

Leverage capital (2):

Sun Bancorp, Inc.

12.2

%

11.7

%

11.3

%

10.3

%

10.1

%

Sun National Bank

12.4

%

11.9

%

11.5

%

10.5

%

9.7

%

Average equity to average assets

11.2

%

10.8

%

10.4

%

9.6

%

9.0

%

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

1.16

%

1.24

%

1.29

%

1.41

%

1.54

%

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

0.20

%

0.24

%

0.37

%

0.36

%

0.73

%

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

0.22

%

0.30

%

0.40

%

0.72

%

1.03

%

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

578

%

517

%

347

%

383

%

210

%

Other data:

Net (charge-offs) recoveries

(605)

344

615

(2,330)

(3,294)

Classified loans

5,922

5,803

9,236

8,461

24,261

Classified assets

9,410

9,918

12,442

11,998

27,986

Non-performing assets:

Non-accrual loans

$

2,207

$

3,121

$

5,156

$

4,611

$

10,729

Non-accrual loans held-for-sale

-

-

389

4,766

4,083

Troubled debt restructurings, non-accrual

910

534

702

854

318

Real estate owned, net

281

909

-

468

522

Total non-performing assets

$

3,461

$

4,564

$

6,247

$

10,699

$

15,652

 

SUN BANCORP, INC. AND SUBSIDIARIES

AVERAGE BALANCE SHEETS (Unaudited)

(dollars in thousands)

For the Three Months Ended

For the Three Months Ended

December 31, 2015

December 31, 2014

Average

Average

Average

Average

Balance

Interest

Yield/Cost

Balance

Interest

Yield/Cost

Interest-earning assets:

Loans receivable (1), (2)

Commercial loans

$

1,124,176

$

11,515

4.10

%

$

1,145,297

$

12,600

4.40

%

Home equity

145,106

1,512

4.17

196,841

2,082

4.23

Residential real estate

255,746

2,178

3.41

301,326

2,471

3.28

Other

1,700

38

8.94

3,391

51

6.02

Total loans receivable

1,526,728

15,243

3.99

1,646,855

17,204

4.18

Investment securities (3)

306,112

1,723

2.25

419,391

2,479

2.36

Interest-earning bank balances

277,429

200

0.29

504,518

322

0.26

Federal funds sold

-

-

-

-

-

-

Total interest-earning assets

2,110,269

17,166

3.25

2,570,764

20,005

3.11

Cash and due from banks

25,145

37,655

Restricted cash

5,000

13,000

Bank properties and equipment, net

32,121

44,802

Goodwill and intangible assets, net

38,188

38,188

Other assets

82,391

81,115

Total non-interest-earning assets

182,845

214,760

Total assets

$

2,293,114

$

2,785,524

Interest-bearing liabilities:

Interest-bearing deposit accounts:

Interest-bearing demand deposit

$

717,542

327

0.18

%

$

953,805

565

0.24

%

Savings deposits

212,641

128

0.24

246,876

151

0.24

Time deposits

361,970

776

0.86

522,857

1,116

0.85

Total interest-bearing deposit accounts

1,292,153

1,231

0.38

1,723,538

1,832

0.43

Short-term borrowings:

Repurchase agreements with customers

-

-

-

1,054

-

-

Long-term borrowings:

FHLBNY Advances (4)

85,622

437

2.04

60,802

317

2.09

Obligations under capital lease

6,740

115

6.82

7,070

122

6.90

Junior subordinated debentures

92,786

568

2.45

92,786

543

2.34

Total borrowings

185,148

1,120

2.42

161,712

982

2.43

Total interest-bearing liabilities

1,477,301

2,351

0.64

1,885,250

2,814

0.60

Non-interest-bearing liabilities:

Non-interest-bearing demand deposits

534,551

608,396

Other liabilities

24,227

42,565

Total non-interest-bearing liabilities

558,778

650,961

Total liabilities

2,036,079

2,536,211

Shareholders' equity

257,035

249,313

Total liabilities and shareholders' equity

$

2,293,114

$

2,785,524

Net interest income

$

14,815

$

17,190

Interest rate spread (5)

2.61

%

2.51

%

Net interest margin (6)

2.81

%

2.67

%

Ratio of average interest-earning assets

   to average interest-bearing liabilities

143

%

136

%

(1)

Average balances include non-accrual loans, loans held-for-sale, branch assets held-for-sale and deposits 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 adjustment for the three months ended December 31, 2015 and 2014 was $0 and $165 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 Year Ended

For the Year Ended

December 31, 2015

December 31, 2014

Average

Average

Average

Average

Balance

Interest

Yield/Cost

Balance

Interest

Yield/Cost

Interest-earning assets:

Loans receivable (1), (2)

Commercial loans

$

1,104,871

$

45,234

4.09

%

$

1,368,385

$

58,773

4.30

%

Home equity

160,560

6,614

4.12

205,093

8,366

4.08

Residential real estate

268,890

9,260

3.44

323,301

11,352

3.51

Other

2,239

161

7.19

13,752

935

6.80

Total loans receivable

1,536,560

61,269

3.99

1,910,531

79,426

4.16

Investment securities (3)

353,229

8,514

2.41

440,710

10,582

2.40

Interest-earning bank balances

338,365

880

0.26

344,326

866

0.25

Total interest-earning assets

2,228,154

70,663

3.17

2,695,567

90,874

3.37

Cash and due from banks

28,631

41,142

Restricted cash

7,170

19,447

Bank properties and equipment, net

36,297

46,777

Goodwill and intangible assets, net

38,188

38,470

Other assets

81,982

84,320

Total non-interest-earning assets

192,268

230,156

Total assets

$

2,420,422

$

2,925,723

Interest-bearing liabilities:

Interest-bearing deposit accounts:

Interest-bearing demand deposits

$

790,237

1,416

0.18

%

$

1,052,717

2,869

0.27

%

Savings deposits

221,309

467

0.21

258,808

672

0.26

Time deposits

408,230

3,454

0.85

565,472

4,817

0.85

Total interest-bearing deposit accounts

1,419,776

5,337

0.38

1,876,997

8,358

0.45

Short-term borrowings:

Repurchase agreements with customers

50

-

-

735

1

0.14

Long-term borrowings

FHLBNY advances (4)

78,704

1,603

2.04

60,865

1,264

2.08

Obligations under capital lease

6,870

470

6.84

7,181

489

6.81

Junior subordinated debentures

92,786

2,200

2.37

92,786

2,150

2.32

Total borrowings

178,410

4,273

2.40

161,567

3,904

2.42

Total interest-bearing liabilities

1,598,186

9,610

0.60

2,038,564

12,262

0.60

Non-interest-bearing liabilities:

Non-interest-bearing demand deposits

541,605

588,717

Other liabilities

26,836

49,115

Total non-interest-bearing liabilities

568,441

637,832

Total liabilities

2,166,627

2,676,396

Shareholders' equity

253,795

249,327

Total liabilities and shareholders' equity

$

2,420,422

$

2,925,723

Net interest income

$

61,053

$

78,612

Interest rate spread (5)

2.57

%

2.77

%

Net interest margin (6)

2.74

%

2.92

%

Ratio of average interest-earning assets

   to average interest-bearing liabilities

139

%

132

%

(1)

Average balances include non-accrual loans, loans held-for-sale, branch assets held-for-sale and deposits 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 adjustment for the twelve months ended December 31, 2015 and 2014 was $455 thousand and $664 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

For the Three Months Ended

December 31, 2015

September 30, 2015

Average

Average

Average

Average

Balance

Interest

Yield/Cost

Balance

Interest

Yield/Cost

Interest-earning assets:

Loans receivable (1), (2)

Commercial loans

$

1,124,176

$

11,515

4.10

%

$

1,147,236

$

11,631

4.06

%

Home equity

145,106

1,512

4.17

152,201

1,569

4.12

Residential real estate

255,746

2,178

3.41

264,396

2,240

3.39

Other

1,700

38

8.94

1,923

39

8.11

Total loans receivable

1,526,728

15,243

3.99

1,565,756

15,479

3.95

Investment securities (3)

306,112

1,723

2.25

344,739

2,061

2.39

Interest-earning bank balances

277,429

200

0.29

274,691

175

0.25

Total interest-earning assets

2,110,269

17,166

3.25

2,185,186

17,715

3.24

Cash and due from banks

25,145

27,543

Restricted cash

5,000

5,000

Bank properties and equipment, net

32,121

34,242

Goodwill and intangible assets, net

38,188

38,188

Other assets

82,391

82,568

Total non-interest-earning assets

182,845

187,541

Total assets

$

2,293,114

$

2,372,727

Interest-bearing liabilities:

Interest-bearing deposit accounts:

Interest-bearing demand deposits

$

717,542

$

327

0.18

%

$

756,915

338

0.18

%

Savings deposits

212,641

128

0.24

211,178

104

0.20

Time deposits

361,970

776

0.86

385,616

821

0.85

Total interest-bearing deposit accounts

1,292,153

1,231

0.38

1,353,709

1,263

0.37

Short-term borrowings:

Repurchase agreements with customers

-

-

-

-

-

-

Long-term borrowings

FHLB advances(4)

85,622

437

2.04

85,668

438

2.05

Obligations under capital lease

6,740

115

6.82

6,835

117

6.85

Junior subordinated debentures

92,786

568

2.45

92,786

555

2.39

Total borrowings

185,148

1,120

2.42

185,289

1,110

2.40

Total interest-bearing liabilities

1,477,301

2,351

0.64

1,538,998

2,373

0.62

Non-interest-bearing liabilities:

Non-interest-bearing demand deposits

534,551

550,689

Other liabilities

24,227

27,355

Total non-interest-bearing liabilities

558,778

578,044

Total liabilities

2,036,079

2,117,042

Shareholders' equity

257,035

255,685

Total liabilities and shareholders' equity

$

2,293,114

$

2,372,727

Net interest income

$

14,815

$

15,342

Interest rate spread (5)

2.61

%

2.62

%

Net interest margin (6)

2.81

%

2.81

%

Ratio of average interest-earning assets

   to average interest-bearing liabilities

143

%

142

%

(1)

Average balances include non-accrual loans, loans held-for-sale, branch assets held-for-sale and deposits 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 adjustment for the three months ended December 31, 2015 and September 30, 2015 was $0 and $125 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.

 

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SOURCE Sun Bancorp, Inc.



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