Sun Bancorp, Inc. Reports 2Q 2015 Net Income of $2.8 Million, or $0.15 per share; Improvement in Loan Growth, Capital Ratios and Expense Management

Jul 27, 2015, 08:45 ET from Sun Bancorp, Inc.

MOUNT LAUREL, N.J., July 27, 2015 /PRNewswire/ --

Second Quarter Highlights

  • Net income of $2.8 million, or $0.15 per share, for the quarter ended June 30, 2015, and $5.6 million, or $0.30 per share, for first half of 2015.
  • Net loan growth of $95 million, or 6.5%, in second quarter.
  • Solid capital foundation in place as tangible equity to assets improves from 6.6% in at June 30, 2014 to 9.2% at June 30, 2015.
  • Asset quality metrics remain strong with non-performing assets down 68% since June 30, 2014 to $6.2 million, or 0.3% of total assets at June 30, 2015.
  • Excess liquidity has declined, but remains elevated: average interest bearing cash totaled $329 million in the second quarter as liquidity deployment efforts increased, as compared to $475 million in the first quarter.
  • Quarterly operating expenses fall to $18.4 million with successful achievement of cost reduction goals representing an impressive 43% reduction when compared to the 2013 quarterly average.

Sun Bancorp, Inc. (NASDAQ: SNBC) (the "Company"), the holding company for Sun National Bank (the "Bank"), is reporting net income of $2.8 million, or $0.15 per diluted share, for the quarter ended June 30, 2015, compared to net income of $2.8 million, or $0.15 per diluted share, for the quarter ended March 31, 2015 and a net loss of $24.2 million, or a loss of $1.39 per diluted share, for the quarter ended June 30, 2014. 

"We are generally pleased with the results of the second quarter and even more so with the underlying trends," said Thomas M. O'Brien, President & CEO.  "The major restructuring announced at this time last year represented an aggressive multi-pronged attack on several legacy conditions which were creating unacceptable operating losses year after year.  In a few short quarters, we have successfully executed on the restructuring plan as evidenced by this quarter's results.  Most impressively, operating expenses which had been running at $32.5 million per quarter in 2013 have been reduced by 43% to $18.4 million while capital ratios are much improved and net interest margin has begun to rebound.  Additionally, the Company's asset quality measures which had been deficient for many years are now among the strongest in the region.  We knew that it would be a challenge to execute on so many initiatives while preparing to build back revenues in our new, more narrowly focused commercial banking strategies.  This renewed focus on growth combined with our ongoing efforts to improve cost efficiency and operate in a safe and sound manner has set the stage for creating shareholder value." 

Discussion of Results:

Balance Sheet

Total assets decreased to $2.38 billion at June 30, 2015, as compared to $2.43 billion at March 31, 2015 and $2.72 billion at December 31, 2014.  The decrease was due primarily to a decrease in cash and cash equivalents, partially offset by loan growth.  The Bank's liquidity levels remain elevated, although cash and cash equivalents decreased to $278.9 million at June 30, 2015, as compared to $388.0 million at March 31, 2015 and $548.4 million at December 31, 2014. The overall decrease in cash and cash equivalents over the recent three and six month periods was primarily due to increases in loan originations, purchases of several multifamily loan participations and the completion of the sale of seven Bank locations in the first quarter of 2015.

Gross loans held-for-investment totaled $1.59 billion at June 30, 2015, as compared to $1.46 billion at March 31, 2015 and $1.49 billion at December 31, 2014.  The increase during the second quarter of 2015 was due primarily to the Bank funding approximately $48 million of 50% participation interest in multi-family loans residing in our market area, while organic loan originations totaled $137 million, including approximately $113 million in commercial real estate and $24 million in commercial and industrial loans.

Deposits were $1.88 billion at June 30, 2015, as compared to $1.96 billion at March 31, 2015 and $2.09 billion at December 31, 2014. The Bank continues to experience deposit reductions as a result of managed run-off of higher yielding municipal accounts and pricing of certain retail deposits. 

The Bank designated $4.6 million in loans, $34.7 million in deposits, $580 thousand of cash and $375 thousand of fixed assets into held-for-sale at June 30, 2015 related to the pending sale of its Hammonton branch location to Cape Bank, which is scheduled to close in the third quarter of 2015. The Bank expects to record a gain on the sale of this location at closing.

"We began to see the results of our liquidity deployment efforts in the second quarter," said O'Brien.  "Against the backdrop of our new relationship-based business development approach, we enjoyed net loan growth through our commercial platform, and the Bank's non-interest demand deposits increased each month through the second quarter.  Continued relationship-based originations and the pending Hammonton branch sale will help us continue to further optimize our liquidity and right size our balance sheet.  While liquidity remains elevated, we have taken a cautious approach to its deployment in light of conflicting economic conditions."

Net Interest Income and Margin

The net interest margin was 2.79% for the three months ended June 30, 2015 as compared to 2.57% for the three months ended March 31, 2015 and 3.03% for the three months ended June 30, 2014.  The increase in net interest margin for the three months ended June 30, 2015 as compared to the three months ended March 31, 2015 is primarily due to the increase in the average commercial loan balances, which increased by $43.6 million, or 4% over the prior quarter and a reduction in average cash balances.

"Our net interest margin continues to be below its optimal level as a result of our excess liquidity," said O'Brien. "However, we are pleased with the net interest income increase from the first quarter as a result of the growth in our loan portfolio," said O'Brien.  "Once we fully deploy our excess liquidity, we anticipate seeing our margin stabilize in the range of 3.10% to 3.20%.  We also continued to manage our deposit interest expense to more accurately reflect the market and the costs of providing our banking services, which led to a further decrease in deposit interest expense in the second quarter.  We believe our relationship approach to originating loans and gathering deposits is expected to gradually bring our net interest margin to forecasted levels."

Non-Interest Income

Non-interest income was $4.9 million for the quarter ended June 30, 2015, as compared to $13.1 million and $4.0 million for the quarters ended March 31, 2015 and June 30, 2014, respectively. The decrease from the linked quarter was primarily attributable to a $9.2 million gain on the sale of seven Cape May area bank locations that was completed in the first quarter of 2015. Offsetting this decrease was a gain of $1.2 million on the sale of loans in the three months ended June 30, 2015. There were modest declines in deposit service charges and fees of $155 thousand and $614 thousand from the quarters ended March 31, 2015 and June 30, 2014, respectively, due to the overall reduction in accounts as a result of the branch reductions that have occurred over the past year. The three months ended June 30, 2014 included swap termination costs of $1.4 million associated with commercial loan sales recorded as a reduction of other income.  The quarter ended June 30, 2014 also included net mortgage banking revenue of $529 thousand, compared to $0 in the current quarter due to the prior year closure of the Company's mortgage banking operations. 

Non-Interest Expense

Non-interest expense for the second quarter of 2015 was $18.4 million, a decrease of $6.9 million from the first quarter of 2015 and a decrease of $15.3 million from the second quarter of 2014. During the first quarter of 2015, the Company recorded several restructuring charges related to the finalization of the Bank's branch rationalization efforts, including $3.3 million of expenses associated with the pending branch consolidations and the sale of the Hammonton branch location. In the first quarter of 2015, problem loan expense of $988 thousand included $667 thousand of one-time costs associated with loan sales. In the second quarter of 2015, the balance in this category was $38 thousand due to significantly reduced volume. 

"While we are still carrying lingering occupancy costs from our previously-announced branch consolidations, our quarterly expenses fell to $18.4 million, representing an annualized run rate of $73 million, well below our previous annualized level of $130 million in 2013," said O'Brien.  "We are pleased with this substantial decline in operating expenses in the one year since our restructuring announcement, and it has effectively liberated the Bank from the substantial legacy expense burdens that were a consistent impediment to our operating profitability.  As a result, we are now actively investing our resources into relationship revenue generation and business development activities and the fruits of that labor are beginning to pay off.  With the remainder of our branch consolidations and pending Cape Bank sale taking place throughout the third quarter, we anticipate approaching a normalized operating expense run rate in the fourth quarter.  We will however, experience the final $500 thousand residual accelerated depreciation expense on these locations in the upcoming third quarter."

Asset Quality

Non-performing assets continued to decline in the second quarter as the balance declined from $10.7 million at March 31, 2015 to $6.2 million at June 30, 2015 due to the sale of non-performing loans held-for-sale during the second quarter. Non-performing loans held-for-investment to total gross loans held-for-investment remained relatively flat at 0.37% at June 30, 2015 as compared to 0.36% at March 31, 2015 and declined from 0.73% at December 31, 2014. 

There was negative provision for loan losses of $1.2 million recorded during the second quarter of 2015 compared to no provision for loan losses in the first quarter of 2015 and $14.8 million of provision for loan losses in the second quarter of 2014. In the second quarter of 2015, the Bank recorded gross recoveries of $2.1 million and recorded gross charge-offs of $1.1 million related to the transfer of problem loans to held-for-sale. The Bank recorded net recoveries of $615 thousand in the second quarter of 2015 as compared to net charge-offs of $2.3 million in the first quarter of 2015 and net charge-offs of $20.2 million in the second quarter of 2014. The allowance for loan losses was $20.3 million, or 1.29% of gross loans held-for-investment, at June 30, 2015, as compared to $20.9 million, or 1.41% of gross loans held-for-investment, at March 31, 2015 and $23.2 million, or 1.54% of gross loans held-for-investment, at December 31, 2014. The allowance for loan losses was 347% of non-performing loans held-for-investment at June 30, 2015 as compared to 383% at March 31, 2015 and 210% at December 31, 2014.

"Our asset quality metrics continue to be strong," said O'Brien.  "Now that we have reduced our classified loans to very low levels, we are focused on proactively managing the risk in the existing portfolio and underwriting new deals conservatively to ensure that our risk profile remains safe and sound.  We are extremely pleased with the progress we have made in improving the quality of our portfolio."

Capital

At June 30, 2015, the capital ratios of the Company and the Bank increased due to planned balance sheet runoff and net income of $2.8 million in the second quarter of 2015. At June 30, 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 approximately 17.5%, 18.8%, 17.5% and 11.5%, respectively. At June 30, 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 approximately 13.8%, 20.8%, 17.2%, and 11.3%, respectively. The Company's tangible equity to tangible assets ratio was 9.2% at June 30, 2015, as compared to 8.8% at March 31, 2015 and 7.7% at December 31, 2014. 

"With two consecutive profitable quarters, we have been able to internally generate $5.6 million in capital through the first six months of 2015," said O'Brien. "That, along with declining total assets and a further reduction in risk-weighted assets improved our solid regulatory capital ratios.  Our asset quality and capital metrics are near the top of our peer group.  This solid foundation gives us the capacity to now prudently grow our loan portfolio and revenues.  This quarter, we began to make progress in reducing our stubbornly-elevated efficiency ratio.  While we continue to have work ahead of us in growing revenue, managing expenses, controlling risk and building a brand, our goal remains to consistently create shareholder value and obtain the removal of our regulatory order.  This quarter is another significant step forward and it demonstrated our ability to generate earnings and operate with safe and sound practices."

Conference Call

The Company will hold a conference call on Monday, July 27, 2015 at 11:00 AM (EDT) 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: 888-765-5574
  • Conference ID: 5330628

About Sun Bancorp, Inc.

Sun Bancorp, Inc. (NASDAQ: SNBC) is a $2.38 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. 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 Sun Bancorp, Inc. (the "Company") and its wholly-owned subsidiary Sun National Bank (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 ability of the Bank to comply with its written agreement with the Office of the Comptroller of the Currency (the "OCC") or the individual minimum capital ratio for the Bank established by the OCC; (ii) the Company's ability to attract and retain key management and staff; (iii) changes in business strategy or an inability to execute strategy due to the occurrence of unanticipated events; (iv) the ability to complete any or all of the transactions contemplated in the Company's comprehensive strategic restructuring plan on the terms currently contemplated; (v) the ability to attract deposits and other sources of liquidity; (vi) changes in the financial performance and/or condition of the Bank's borrowers; (vii) changes in consumer spending, borrowing and saving habits; (viii) the ability to increase market share and control expenses; (ix) changes in estimates of future loan loss reserve requirements based upon the periodic review thereof under relevant regulatory and accounting requirements; (x) local, regional and national economic conditions and events and the impact they may have on the Company and its customers; (xi) volatility in the credit and equity markets and its effect on the general economy; (xii) the credit risks of lending activities, including changes in the level and trend of loan delinquencies and write-offs; (xii) the overall quality of the composition of the Company's loan and securities portfolios; (xiv) inflation, interest rate, securities market and monetary fluctuations;(xv) legislative and regulatory changes, including the Dodd-Frank Wall Street Reform and Consumer Protection Act and impending 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; (xvi) 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; (xvii) competition among providers of financial services; (xviii) 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 quarter ended March 31, 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 June 30, 2015, March 31, 2015, December 31, 2014, September 30, 2014, and June 30, 2014.

June 30, 2015

March 31, 2015

December 31, 2014

September 30, 2014

June 30, 2014

Tangible book value per common share:

    Shareholders' equity

$

252,926

$

249, 235

$

245,323

$

247,047

$

227,656

Less: Intangible assets

38,188

38,188

38,188

38,188

38,426

Tangible equity

$

214,738

$

211,047

$

207,135

$

208,859

$

189,230

  Common stock

18,901

18,901

18,901

18,885

17,752

  Less: Treasury stock

237

282

285

300

319

Total outstanding shares

18,664

18,619

18,616

18,585

17,433

Tangible book value per common share:

$

11.51

$

11.34

$

11.13

$

11.24

$

10.85

 

Return on Average Tangible Equity (dollars in thousands)

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

Three Months Ended

June 30, 2015

March 31, 2015

December 31, 2014

September 30, 2014

June

30, 2014

Net income(loss)

$

2,825

$

2,776

$

(2,829)

$

(825)

$

(24,248)

Average tangible equity:

     Average shareholders' equity

$

252,391

$

249,970

$

249,313

$

243,020

$

254,116

 Less: Average intangible assets

38,188

38,188

38,188

38,281

38,568

Average tangible equity

$

214,203

$

211,782

$

211,125

$

204,739

$

215,548

Return on average tangible equity(1):

5.3

%

5.2

%

(5.4)

%

(1.6)

%

(45.0)%

(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 Six Months Ended

June 30,

June 30,

2015

2014

2015

2014

Profitability for the period:

   Net interest income

$

15,375

$

20,612

$

30,566

$

42,004

   Provision for loan losses

(1,218)

14,803

(1,218)

14,803

   Non-interest income

4,879

3,977

17,966

8,926

   Non-interest expense

18,363

33,677

43,581

61,565

   Income(loss) before income taxes

3,109

(23,891)

6,169

(25,438)

   Income tax expense

284

357

568

716

   Net income(loss) available to common shareholders

$

2,825

$

(24,248)

$

5,601

$

(26,154)

Financial ratios:

   Return on average assets(1)

0.5

%

(3.3)

%

0.4

%

(1.7)

%

   Return on average equity(1)

4.5

%

(38.2)

%

4.5

%

(20.7)

%

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

5.3

%

(45.0)

%

5.3

%

(24.5)

%

   Net interest margin(1)

2.79

%

3.03

%

2.68

%

3.05

%

   Efficiency ratio

91

%

137

%

90

%

121

%

   Income(loss) per common share:

      Basic(3)

$

0.15

$

(1.39)

$

0.30

$

(1.50)

      Diluted(3)

$

0.15

$

(1.39)

$

0.30

$

(1.50)

Average equity to average assets

10.4

%

8.5

%

10.0

%

8.37

%

June 30,

December 31,

2015

2014

2014

At period-end:

    Total assets

$

2,379,023

$

2,894,658

2,715,348

    Total deposits

1,876,721

2,272,765

2,091,904

    Loans receivable, net of allowance for loan losses

1,558,576

1,827,724

1,486,898

    Loans held-for-sale

2,006

29,171

4,083

    Investments

353,245

454,051

409,950

    Borrowings

92,578

68,734

68,978

    Junior subordinated debentures

92,786

92,786

92,786

    Shareholders' equity

252,926

227,656

245,323

Credit quality and capital ratios:

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

1.29

%

1.53

%

1.54

%

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

0.37

%

0.76

%

0.73

%

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

0.71

%

1.02

%

1.03

%

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

347

%

202

%

210

%

Tier 1 common equity risk-based capital(4)(5):

        Sun Bancorp, Inc.

13.8

%

-

-

        Sun National Bank

17.5

%

-

-

    Total risk-based capital(4):

        Sun Bancorp, Inc.

20.8

%

15.0

%

19.3

%

        Sun National Bank

18.8

%

14.5

%

17.4

%

Tier 1 risk-based capital(4):

        Sun Bancorp, Inc.

17.2

%

12.4

%

16.7

%

        Sun National Bank

17.5

%

13.2

%

16.1

%

Leverage capital(4):

        Sun Bancorp, Inc.

11.3

%

8.6

%

10.1

%

        Sun National Bank

11.5

%

9.1

%

9.7

%

    Book value per common share (3)

$

13.55

$

13.39

$

13.18

    Tangible book value per common share (3)

$

11.51

$

11.34

$

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) Prior periods were retroactively adjusted for the impact of the 1-for-5 reverse stock split completed on August 11, 2014.

(4) June 30, 2015 capital ratios are estimated, subject to regulatory filings.

(5) 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 par value amounts)

June 30,  2015

December 31, 2014

ASSETS

Cash and due from banks

$

28,544

$

42,548

Interest-earning bank balances

250,319

505,885

Cash and cash equivalents

278,863

548,433

  Restricted cash

5,000

13,000

Investment securities available for sale (amortized cost of $336,979 and    $394,733 at June 30, 2015 and December 31, 2014, respectively)

337,229

394,500

Investment securities held to maturity (estimated fair value of $470 and $501 at    June 30, 2015 and December 31, 2014, respectively)

462

489

Loans receivable (net of allowance for loan losses of $20,331 and $23,246 at    June 30, 2015 and December 31, 2014, respectively)

1,558,599

1,486,898

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

2,006

4,083

Branch assets held-for-sale

5,604

69,064

Restricted equity investments, at cost

15,554

14,961

Bank properties and equipment, net

35,090

40,155

Real estate owned

-

522

Accrued interest receivable

5,233

5,397

Goodwill

38,188

38,188

Bank owned life insurance (BOLI)

80,147

79,132

Other assets

17,048

20,526

Total assets

$

2,379,023

$

2,715,348

LIABILITIES AND SHAREHOLDERS' EQUITY

Liabilities:

Deposits

$

1,876,721

$

2,091,904

Branch deposits held-for-sale

34,689

183,395

Securities sold under agreements to repurchase – customers

-

1,156

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

85,698

60,787

Obligations under capital lease

6,880

7,035

Junior subordinated debentures

92,786

92,786

Deferred taxes, net

2,275

1,514

Other liabilities

27,048

31,448

Total liabilities

2,126,097

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; 18,901,124 shares    issued and 18,664,268 shares outstanding at June 30, 2015; 18,900,877    shares issued and 18,615,950 shares outstanding at December 31, 2014

94,506

94,508

Additional paid-in capital

511,975

514,071

Retained deficit

(342,158)

(347,761)

Accumulated other comprehensive loss

148

(138)

Deferred compensation plan trust

(599)

(599)

Treasury stock at cost, 236,856 shares at June 30, 2015; and 284,927 shares at    December 31, 2014

(10,946)

(14,757)

Total shareholders' equity

252,926

245,324

Total liabilities and shareholders' equity

$

2,379,023

$

2,715,348

 

SUN BANCORP, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF OPERATIONS (Unaudited)

(Dollars in thousands, except per share amounts)

For the Three Months Ended June 30,

For the Six Months Ended June 30,

2015

2014

2015

2014

INTEREST INCOME

Interest and fees on loans

$

15,451

$

21,067

$

30,549

$

42,916

Interest on taxable investment securities

1,831

2,193

3,877

4,443

Interest on non-taxable investment securities

309

308

615

617

Dividends on restricted equity investments

202

209

411

441

Total interest income

17,793

23,777

35,452

48,417

INTEREST EXPENSE

Interest on deposits

1,337

2,188

2,843

4,469

Interest on funds borrowed

536

443

966

879

Interest on junior subordinated debentures

545

534

1,077

1,065

Total interest expense

2,418

3,165

4,886

6,413

Net interest income

15,375

20,612

30,566

42,004

PROVISION FOR LOAN LOSSES

(1,218)

14,803

(1,218)

14,803

Net interest income after provision for loan losses

16,593

5,809

31,784

27,201

NON-INTEREST INCOME

Deposit service charges and fees

1,849

2,463

3,853

4,858

Interchange fees

554

629

1,098

1,192

Mortgage banking revenue, net

-

529

-

1,164

Gain on sale of bank branches

-

-

9,235

-

Gain on sale of loans

1,226

-

1,239

-

Investment products income

488

715

1,077

1,332

BOLI income

503

469

1,015

930

Other

259

(828)

449

(550)

Total non-interest income

4,879

3,977

17,966

8,926

NON-INTEREST EXPENSE

Salaries and employee benefits

9,120

16,803

19,710

30,584

Occupancy expense

3,034

3,552

8,001

7,818

Equipment expense

1,500

2,356

5,014

4,105

Data processing expense

1,304

1,281

2,612

2,478

Professional fees

711

2,353

1,547

3,839

Insurance expenses

1,094

1,358

2,341

2,825

Advertising expense

223

523

458

1,109

Problem loan expense

38

566

1,026

1,198

Other

1,339

4,885

2,872

7,609

Total non-interest expense

18,363

33,677

43,581

61,565

INCOME(LOSS) BEFORE INCOME TAXES

3,109

(23,891)

6,169

(25,438)

INCOME TAX EXPENSE

284

357

568

716

NET INCOME(LOSS) AVAILABLE TO COMMON    SHAREHOLDERS

$

2,825

$

(24,248)

$

5,601

$

(26,154)

Basic earnings(loss) per share(1)

$

0.15

$

(1.39)

$

0.30

$

(1.50)

Diluted earnings(loss) per share(1)

$

0.15

$

(1.39)

$

0.30

$

(1.50)

Weighted average shares – basic(1)

18,632,526

17,417,829

18,624,585

17,383,192

Weighted average shares - diluted(1)

18,684,597

17,417,829

18,663,721

17,383,192

(1) Prior periods were retroactively adjusted for the impact of the 1-for-5 reverse stock split completed on August 11, 2014

 

SUN BANCORP, INC. AND SUBSIDIARIES

HISTORICAL TRENDS IN QUARTERLY FINANCIAL DATA (Unaudited)

(Dollars in thousands)

2015

2015

2014

2014

2014

Q2

Q1

Q4

Q3

Q2

Balance sheet at quarter end: 

Cash and cash equivalents

$

278,863

$

388,021

$

548,433

$

504,353

$

330,440

Restricted cash

5,000

13,000

13,000

13,000

26,000

Investment securities

353,245

367,178

409,950

425,079

454,051

Loans held-for-investment: 

        Commercial and industrial

1,153,310

1,042,821

1,052,932

1,196,767

1,363,900

        Home equity 

139,789

145,806

174,165

173,227

186,953

        Residential real estate 

266,312

273,118

276,993

299,838

298,063

        Other 

19,519

22,427

6,054

6,577

7,200

            Total gross loans held-for-investment

1,578,930

1,484,172

1,510,144

1,676,409

1,856,116

Allowance for loan losses 

(20,331)

(20,916)

(23,246)

(26,540)

(28,392)

            Net loans held-for-investment

1,558,599

1,463,256

1,486,898

1,649,869

1,827,724

   Loans held-for-sale

2,006

4,766

4,083

7,365

29,171

   Branch assets held-for-sale

5,604

5,419

69,064

31,408

34,058

   Goodwill 

38,188

38,188

38,188

38,188

38,188

   Intangible assets

-

-

-

-

238

   Total assets 

2,379,023

2,436,391

2,715,348

2,820,202

2,894,658

   Total deposits

1,876,721

1,959,556

2,091,904

2,170,627

2,272,765

   Branch deposits held-for-sale

34,689

33,381

183,395

192,068

160,769

   Securities sold under agreements to repurchase - customers

-

156

1,156

963

670

   Advances from FHLBNY

85,698

60,743

60,787

60,830

60,873

   Obligations under capital lease

6,880

6,958

7,035

7,111

7,191

   Junior subordinated debentures

92,786

92,786

92,786

92,786

92,786

   Total shareholders' equity

252,926

249,235

245,323

247,047

227,656

Quarterly average balance sheet: 

    Loans(1)

        Commercial and industrial 

$

1,095,202

$

1,051,610

$

1,145,297

$

1,292,705

$

1,480,491

        Home equity

161,698

183,753

196,841

201,754

210,068

        Residential real estate

271,585

284,197

301,326

322,751

338,028

        Other

2,122

3,233

3,391

3,755

23,196

            Total gross loans 

1,530,607

1,522,793

1,646,855

1,820,965

2,051,783

    Securities and other interest-earning assets 

699,687

867,633

923,909

840,541

694,529

    Total interest-earning assets 

2,230,294

2,390,426

2,570,764

2,661,506

2,746,312

    Total assets 

2,419,520

2,600,231

2,785,525

2,888,920

2,982,427

    Non-interest-bearing demand deposits 

521,563

559,793

608,396

612,775

573,290

Total deposits

1,956,592

2,162,142

2,331,934

2,429,606

2,519,901

    Total interest-bearing liabilities 

1,617,176

1,763,062

1,885,250

1,978,480

2,108,103

    Total shareholders' equity 

252,391

249,970

249,313

243,020

254,116

Capital and credit quality measures:

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

       Sun Bancorp, Inc.

13.8

%

13.4

%

-

-

-

       Sun National Bank

17.5

%

17.2

%

-

-

-

Total risk-based capital (2):

        Sun Bancorp, Inc.

20.8

%

20.4

%

19.3

%

17.9

%

15.0

%

        Sun National Bank

18.8

%

18.4

%

17.4

%

16.2

%

14.5

%

    Tier 1 risk-based capital (2):

        Sun Bancorp, Inc.

17.2

%

16.8

%

16.7

%

15.6

%

12.4

%

        Sun National Bank

17.5

%

17.1

%

16.1

%

14.9

%

13.2

%

    Leverage capital (2):

        Sun Bancorp, Inc.

11.3

%

10.3

%

10.1

%

9.8

%

8.6

%

        Sun National Bank

11.5

%

10.5

%

9.7

%

9.4

%

9.1

%

    Average equity to average assets

10.4

%

9.6

%

9.0

%

8.4

%

8.5

%

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

1.29

%

1.41

%

1.54

%

1.58

%

1.50

%

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

0.37

%

0.36

%

0.73

%

0.84

%

0.76

%

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

0.40

%

0.72

%

1.03

%

1.07

%

1.02

%

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

347

%

383

%

210

%

188

%

202

%

Other data:

Net recoveries (charge-offs)

$

615

$

(2,312)

$

(3,294)

$

(1,852)

$

(20,179)

Classified loans

7,940

8,461

24,261

21,022

33,077

Classified assets

11,147

11,998

27,986

25,338

38,226

Non-performing assets:

           Non-accrual loans

5,156

4,611

10,729

13,561

13,470

       Non-accrual loans held-for-sale

389

4,766

4,083

2,770

4,086

           Troubled debt restructurings, non-accrual

702

854

318

528

583

           Real estate owned, net 

-

468

522

1,084

1,327

                Total non-performing assets

$

6,247

$

10,699

$

15,652

$

17,943

$

19,466

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

(2)      June 30, 2015 capital ratios are estimated, subject to regulatory filings.

(3)      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

HISTORICAL TRENDS IN QUARTERLY FINANCIAL DATA (Unaudited)

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

 

2015

2015

2014

2014

2014

Q2

Q1

Q4

Q3

Q2

Profitability for the quarter:

Net interest income

$

15,375

$

15,191

$

17,026

$

18,921

$

20,612

Provision for loan losses

(1,218)

-

-

-

14,803

Non-interest income

4,879

13,087

4,142

4,695

3,977

Non-interest expense excluding    amortization of intangible assets

18,363

25,218

23,705

23,894

33,394

Amortization of intangible assets

-

-

-

238

283

Income(loss) before income taxes

3,109

3,060

(2,537)

(516)

(23,891)

Income tax expense

284

284

292

309

357

Net income(loss) available to common    shareholders

$

2,825

$

2,776

$

(2,829)

$

(825)

$

(24,248)

Financial ratios:

Return on average assets (1)

0.5

%

0.4

%

(0.4)

%

(0.1)

%

(3.3)

%

Return on average equity (1)

5.0

%

4.4

%

(4.5)

%

(1.4)

%

(38.2)

%

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

5.3

%

5.2

%

(5.4)

%

(1.6)

%

(45.0)

%

Net interest margin (1)

2.79

%

2.57

%

2.67

%

2.87

%

3.03

%

Efficiency ratio

91

%

89

%

112

%

95

%

137

%

Per share data:

Income(loss) per common share:

Basic(3)

$

0.15

$

0.15

$

(0.15)

$

(0.05)

$

(1.39)

Diluted(3)

$

0.15

$

0.15

$

(0.15)

$

(0.05)

$

(1.39)

Book value(3)

$

13.55

$

13.39

$

13.18

$

13.29

$

13.06

Tangible book value(3)

$

11.51

$

11.34

$

11.13

$

11.24

$

10.85

Average basic shares(3)

18,632,526

18,616,537

18,589,717

17,417,829

17,348,169

Average diluted shares(3)

18,684,597

18,639,501

18,589,717

17,417,829

17,348,169

Non-interest income:

Deposit service charges and fees

$

1,849

$

2,004

$

2,383

$

2,541

$

2,463

Interchange fees

554

544

540

624

629

Mortgage banking revenue, net

-

-

29

423

529

Gain on sale of loans

1,226

-

-

-

-

Net gain on sale of bank branches

-

9,235

-

-

-

Investment products income

488

589

480

635

715

BOLI income

503

512

482

484

469

Other income

259

203

228

(42)

(828)

        Total non-interest income

$

4,879

$

13,087

$

4,142

$

4,695

$

3,977

Non-interest expense:

Salaries and employee benefits

$

9,120

$

10,590

$

9,412

$

11,818

$

16,803

    Occupancy expense

3,034

4,967

5,432

2,980

3,552

    Equipment expense

1,500

3,514

1,487

1,695

2,356

    Data processing expense

1,304

1,308

1,202

1,299

1,281

    Professional fees

711

836

1,225

1,423

2,353

    Insurance expense

1,094

1,247

1,299

1,443

1,358

    Advertising expense

223

235

386

567

523

    Problem loan expense

38

988

547

294

566

    Other expense

1,339

1,533

2,715

2,613

4,885

       Total non-interest expense

$

18,363

$

25,218

$

23,705

$

24,132

$

33,677

(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) Prior periods were retroactively adjusted for the impact of the 1-for-5 reverse stock split completed on August 11, 2014.

 

SUN BANCORP, INC. AND SUBSIDIARIES

AVERAGE BALANCE SHEETS (Unaudited)

(Dollars in thousands)

 For the Three Months Ended June 30,

2015

2014

Average

Income/

Yield/

Average

Income/

Yield/

Balance

Expense

Cost

Balance

Expense

Cost

Interest-earning assets:

Loans receivable (1),(2):

Commercial and industrial

$

1,095,202

$

11,285

4.12

%

$

1,480,491

$

15,385

4.16

%

Home equity

161,698

1,685

4.17

185,710

1,777

3.83

Residential real estate

271,585

2,443

3.60

338,028

3,187

3.77

Other

2,122

39

7.35

47,554

717

6.03

Total loans receivable

1,530,607

15,452

4.04

2,051,783

21,066

4.11

Investment securities(3)

370,469

2,300

2.48

451,477

2,723

2.41

Interest-earning bank balances

329,218

208

0.25

243,052

154

0.25

Total interest-earning assets

2,230,294

17,960

3.22

2,746,312

23,943

3.49

Non-interest earning assets:

  Cash and due from banks

34,014

67,196

  Bank properties and equipment, net

36,328

47,586

  Goodwill and intangible assets, net

38,188

38,568

  Other assets

80,696

82,765

Total non-interest-earning assets

189,226

236,115

Total assets

$

2,419,520

$

2,982,427

Interest-bearing liabilities:

Interest-bearing deposit accounts:

Interest-bearing demand deposits

$

793,954

$

345

0.17

%

$

1,099,385

$

790

0.29

%

Savings deposits

222,372

108

0.19

264,386

177

0.27

Time deposits

418,703

884

0.84

582,840

1,223

0.84

Total interest-bearing deposit    accounts

1,435,029

1,337

0.37

1,946,611

2,190

0.45

Short-term borrowings:

Fed Funds Purchased

-

-

-

-

-

-

Securities sold under agreements to     repurchase - customers

29

-

-

598

-

0.09

Long-term borrowings:

FHLBNY advances (4)

82,416

418

2.03

60,887

315

2.07

Obligations under capital lease

6,916

118

6.82

7,221

127

7.04

Junior subordinated debentures

92,786

545

2.35

92,786

533

2.30

Total borrowings

182,147

1,081

2.37

161,492

975

2.41

Total interest-bearing liabilities

1,617,176

2,418

0.60

2,108,103

3,165

0.60

Non-interest bearing liabilities:

  Non-interest-bearing demand deposits

521,563

573,290

  Other liabilities

28,392

46,918

Total non-interest bearing liabilities

549,955

620,208

Total liabilities

2,167,131

2,728,311

Shareholders' equity 

252,391

254,116

Total liabilities and shareholders'     equity

$

2,419,522

$

2,982,427

Net interest income

$

15,543

$

20,778

Interest rate spread (5)

2.62

%

2.89

%

Net interest margin (6)

2.79

%

3.03

%

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

138

%

130

%

(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 June 30, 2015 and 2014 were $167 thousand and $166 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 Six Months Ended June 30,

2015

2014

Average

Income/

Yield/

Average

Income/

Yield/

Balance

Expense

Cost

Balance

Expense

Cost

Interest-earning assets:

Loans receivable (1),(2):

Commercial

$

1,073,526

$

22,089

4.12

%

$

1,520,246

31,735

4.17

%

Home equity

172,664

3,533

4.09

210,986

4,222

4.00

Residential real estate

277,856

4,842

3.49

334,749

6,145

3.67

Other

2,675

84

6.28

24,100

814

6.76

Total loans receivable

1,526,721

30,548

4.00

2,090,081

42,916

4.11

Investment securities(3)

381,494

4,729

2.48

454,590

5,541

2.44

Interest-earning bank balances

401,702

505

0.25

231,645

292

0.25

Total interest-earning assets

2,309,917

35,782

3.10

2,776,316

48,749

3.51

Non-interest earning assets:

  Cash and due from banks

33,867

41,269

  Restricted cash

6,464

26,000

  Bank properties and equipment, net

39,465

48,093

  Goodwill and intangible assets, net

38,188

38,709

  Other assets

81,476

85,303

Total non-interest-earning assets

199,460

239,374

Total assets

$

2,509,377

$

3,015,690

Interest-bearing liabilities:

Interest-bearing deposit accounts:

Interest-bearing demand deposits

$

844,124

$

751

0.18

%

$

1,124,284

1,597

0.28

%

Savings deposits

230,865

235

0.20

265,837

357

0.27

Time deposits

443,238

1,857

0.84

595,459

2,515

0.84

Total interest-bearing deposit     accounts

1,518,227

2,843

0.37

1,985,580

4,469

0.45

Short-term borrowings:

Securities sold under agreements to     repurchase - customers

101

-

-

502

-

-

Long-term borrowings:

FHLBNY advances (4)

71,647

728

2.03

60,908

628

2.06

Obligations under capital lease

6,955

238

6.84

7,257

250

6.89

Junior subordinated debentures

92,786

1,077

2.32

92,786

1,065

2.30

Total borrowings

171,489

2,043

2.38

161,453

1,943

2.41

Total interest-bearing liabilities

1,689,716

4,886

0.58

2,147,033

6,412

0.60

Non-interest bearing liabilities:

  Non-interest-bearing demand deposits

540,572

566,486

  Other liabilities

27,902

49,631

Total non-interest bearing liabilities

568,474

616,117

Total liabilities

2,258,190

2,763,150

Shareholders' equity 

251,187

252,540

Total liabilities and shareholders'    equity

$

2,509,377

$

3,015,690

Net interest income

$

30,896

$

42,337

Interest rate spread (5)

2.52

%

2.91

%

Net interest margin (6)

2.68

%

3.05

%

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

137

%

129

%

(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 six months ended June 30, 2015 and 2014 were $330 thousand and $333 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

June 30, 2015

March 31, 2015

Average

Income/

Yield/

Average

Income/

Yield/

Balance

Expense

Cost

Balance

Expense

Cost

Interest-earning assets:

Loans receivable (1),(2):

Commercial and industrial

$

1,095,202

$

11,285

4.12

%

$

1,051,610

$

10,803

4.11

%

Home equity

161,698

1,685

4.17

183,753

1,848

4.02

Residential real estate

271,585

2,443

3.60

284,197

2,399

3.38

Other

2,122

39

7.35

3,233

47

5.82

Total loans receivable

1,530,607

15,452

4.04

1,522,793

15,097

3.97

Investment securities(3)

370,469

2,300

2.48

392,642

2,430

2.48

Interest-earning bank balances

329,218

208

0.25

474,991

297

0.25

Total interest-earning assets

2,230,294

17,960

3.22

2,390,426

17,824

2.98

Non-interest earning assets:

  Cash and due from banks

34,014

46,718

  Bank properties and equipment, net

36,328

42,638

  Goodwill and intangible assets, net

38,188

38,188

  Other assets

80,696

82,261

Total non-interest-earning assets

189,226

209,805

Total assets

$

2,419,520

$

2,600,231

Interest-bearing liabilities:

Interest-bearing deposit accounts:

Interest-bearing demand deposits

$

793,954

$

345

0.17

%

$

894,851

$

406

0.18

%

Savings deposits

222,372

108

0.19

239,452

127

0.21

Time deposits

418,703

884

0.84

468,046

973

0.83

Total interest-bearing deposit     accounts

1,435,029

1,337

0.37

1,602,349

1,506

0.38

Short-term borrowings:

Federal funds purchased

-

-

-

-

-

-

Securities sold under agreements to     repurchase - customers

29

-

-

175

-

0.00

Long-term borrowings:

FHLBNY advances (4)

82,416

418

2.03

60,758

310

2.04

Obligations under capital lease

6,916

118

6.82

6,994

120

6.86

Junior subordinated debentures

92,786

545

2.35

92,786

533

2.30

Total borrowings

182,147

1,081

2.37

160,713

963

2.40

Total interest-bearing liabilities

1,617,176

2,418

0.60

1,763,062

2,469

0.56

Non-interest bearing liabilities:

  Non-interest-bearing demand deposits

521,563

559,793

  Other liabilities

28,392

27,406

Total non-interest bearing liabilities

549,955

587,199

Total liabilities

2,167,131

2,350,261

Shareholders' equity 

252,391

249,970

Total liabilities and shareholders'     equity

$

2,419,522

$

2,600,231

Net interest income

$

15,543

$

15,355

Interest rate spread (5)

2.62

%

2.42

%

Net interest margin (6)

2.79

%

2.57

%

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

138

%

136

%

(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 June 30, 2015 and March 31, 2015 were $167 thousand and $164 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.

 

SOURCE Sun Bancorp, Inc.



RELATED LINKS

http://www.sunnationalbank.com