Sun Bancorp, Inc. Reports Fourth Quarter 2013 Results

Jan 22, 2014, 17:56 ET from Sun Bancorp, Inc.

VINELAND, N.J., Jan. 22, 2014 /PRNewswire/ --

Fourth Quarter Highlights

  • Significant reduction in problem loans:
    • Classified Loans declined 41% from the prior quarter to $102.4 million
    • Non-Performing Loans declined 31% to $38.0 million during the quarter and declined 60% or $57.6 million for the year
  • The ratio of non-performing loans/Loans held-for-investment decreased to 1.78%; down from 2.55% in the prior quarter and 3.64% in the fourth quarter of 2012
  • Sale of $34.8 million of classified commercial loans to third-party investors resulting in a net loss of $6.9 million inclusive of swap termination costs and broker fees
  • Tier 1 Leverage Ratio ends year at 9.0% with the total risk based ratio at 14.4%

Sun Bancorp, Inc. (NASDAQ: SNBC) (the "Company") reported today a net loss available to common shareholders of $8.4 million, or a loss of $0.10 per diluted share, for the quarter ended December 31, 2013, compared to a loss of $4.9 million, or a loss of $0.06 per diluted share, and a loss of $25.0 million, or a loss of $0.29 per diluted share, for the third quarter of 2013 and the fourth quarter of 2012, respectively.

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

  • Significant asset quality improvement achieved resulting from the sale of $34.8 million of classified loans, $20.6 million of payoffs in the classified loan category and upgrades of $20.0 million from classified to pass rated.
  • Quarterly provision expense of $2.6 million as compared to $724 thousand in the third quarter of 2013. The allowance for loan losses equaled $35.5 million at December 31, 2013, a decrease of $13.3 million from September 30, 2013. The allowance for loan losses equaled 1.66% of gross loans held-for-investment and 93.5% of non-performing loans at December 31, 2013 as compared to 2.25% and 88.2%, respectively, at September 30, 2013 and 2.02% and 55.3%, respectively, at December 31, 2012.
  • Professional fees totaled $4.9 million in the fourth quarter and $18.2 million for 2013
  • Net interest margin was 2.99% and average interest-bearing cash was $342 million

"While we are disappointed with our profitability, we are pleased with what we believe has been significant progress in reducing our problem loans and improving our foundation for future growth," said Sidney Brown. "We enter 2014 with a renewed focus on improving profitability through prudent growth in revenue, significant reduction in professional fees and an improvement in operational efficiency," added Thomas Brugger.

Discussion of Results:

Balance Sheet

  • Total assets were $3.09 billion at December 31, 2013, as compared to $3.24 billion at September 30, 2013 and $3.22 billion at December 31, 2012. 
  • Cash and cash equivalents were $293.8 million at December 31, 2013, as compared to $453.6 million at September 30, 2013 and $169.6 million at December 31, 2012. The decrease of $159.8 million in the fourth quarter of 2013 as compared to the prior quarter was primarily due to declines in deposits of $131.1 million and a net increase of $32.8 million in investment securities. The decline in deposits was driven by planned deposit run off in government deposits and a seasonal decline in commercial deposits. Total deposits at December 31, 2013 were $2.62 billion.
  • Investment securities available for sale were $440.1 million as of December 31, 2013 compared to $407.2 million at September 30, 2013 and $443.2 million at December 31, 2012. The increase of $32.9 million in the fourth quarter of 2013 from the prior quarter was due to the purchase of $54.5 million of asset backed and mortgage backed securities, offset by paydowns.
  • Gross loans held-for-investment were $2.14 billion at December 31, 2013, as compared to $2.17 billion at September 30, 2013 and $2.28 billion at December 31, 2012. Since December 31, 2012, gross loans held-for-investment decreased $138.9 million, primarily due to paydowns and sales of commercial loans and the sale of jumbo residential mortgages.

Net Interest Income and Margin

  • Net interest income decreased $1.0 million from the linked quarter to $21.9 million for the three months ended December 31, 2013. The net interest margin decreased 11 basis points to 2.99% for the three months ended December 31, 2013 from 3.10% for the linked quarter, and decreased 31 basis points as compared to the fourth quarter of 2012. The average yield on interest-earning assets decreased 14 basis points to 3.47% at December 31, 2013 from 3.61% at September 30, 2013. This decrease was due to a decrease in commercial loan yields of 31 basis points as compared to the linked quarter resulting from a prior quarter interest recovery of $1.2 million. Excluding this item, the margin in the third quarter of 2013 would have been 2.90%. The margin variance between the quarter ended December 31, 2013 and the comparable prior year period is primarily due to a decrease of $167.1 million in average commercial loans and an increase of $303.8 million in average interest-earning bank balances.

Non-Interest Income

  • Non-interest income was $4.7 million for the quarter ended December 31, 2013, as compared to $5.8 million for the quarter ended September 30, 2013 and $6.7 million for the comparable prior year quarter. The decrease from the linked quarter was primarily attributable to a decrease in net mortgage banking revenue of $593 thousand and an increase of $330 thousand in negative derivative credit valuation adjustments from the prior quarter. The decline in mortgage banking revenue continues to be due to lower production volume in a higher interest rate environment. The negative credit valuation adjustment of $710 thousand in the fourth quarter of 2013 was primarily due to swap termination fees of $869 thousand recorded on three commercial relationships that were sold during the quarter.

Non-Interest Expense

  • Non-interest expense was $32.5 million in the fourth quarter of 2013, a decrease of $460 thousand compared to the linked quarter and an increase of $960 thousand over the comparable prior year quarter. In comparison to the linked quarter, decreases in professional fees and commission expense of $1.1 million and $903 thousand, respectively, were partially offset by increases of $414 thousand in salaries and employee benefits, other expense of $405 thousand, real estate owned expense of $277 thousand and advertising expense of $227 thousand. Professional fees declined as a result of a decreasing need for regulatory compliance consulting services.  Commission expense has decreased due to reduced mortgage production volumes.  Salaries and benefits expense has increased from the prior quarter due to $585 thousand of severance costs recorded in the fourth quarter. Other expense for the current quarter includes $551 thousand of broker fees associated with commercial loan sales. Professional fees increased by $3.5 million from the same prior year quarter due to regulatory compliance and mortgage risk related consulting services and platform enhancements performed in 2013. This increase was partially offset by decreases in commission expense, real estate owned expense, net and amortization of intangible assets of $1.4 million, $479 thousand and $466 thousand, respectively, compared to the fourth quarter in 2012.

Asset Quality

  • During the fourth quarter of 2013, provision expense of $2.6 million was recorded, as compared to $724 thousand in the linked quarter and $24.2 million in the comparable prior year quarter. The allowance for loan losses was $35.5 million at December 31, 2013, or 1.66% of gross loans held-for-investment, as compared to 2.25% at September 30, 2013 and 2.02% at December 31, 2012. Net charge-offs were $16.0 million in the fourth quarter of 2013, as compared to net recoveries in the linked quarter of $123 thousand and net charge-offs in the prior year quarter of $26.7 million. Net charge-offs in the fourth quarter of 2013 included $10.2 million related to the sale of $34.8 million of classified commercial real estate loans and $5.0 million  related to the charge-off of specific reserves on two legacy non-performing loans.
  • Total non-performing assets were $40.5 million, or 1.87% of total gross loans held-for-investment, loans held-for-sale and real estate owned at December 31, 2013, as compared to $60.5 million, or 2.76%, and $103.1 million, or 4.29%, respectively, at September 30, 2013 and December 31, 2012. Non-performing loans decreased $17.4 million over the linked quarter to $38.0 million at December 31, 2013 from $55.4 million at September 30, 2013 and decreased $57.6 million from $95.6 million at December 31, 2012. The decrease from the linked quarter was due to the aforementioned loan sales which included $23.2 million of non-performing commercial real estate loans and charge-offs recorded of $5.0 million on two legacy non-performing commercial loans. Offsetting these declines were downgrades of $13.9 million to non-performing status. For the year, successful workout resolution has resulted in the payoff of ten non-performing commercial loans totaling $40.5 million.

Capital

  • Shareholders' equity totaled $245.1 million at December 31, 2013 compared to $257.1 million at September 30, 2013 and $262.6 million at December 31, 2012. The Company's tangible equity to tangible assets ratio was 6.76% at December 31, 2013, as compared to 6.81% at September 30, 2013 and 6.95% at December 31, 2012.  At December 31, 2013, the Company's total risk-based capital ratio, Tier 1 capital ratio and leverage capital ratio were approximately 14.40%, 12.34%, and 8.98%, respectively.  At December 31, 2013, Sun National Bank's total risk-based capital ratio, Tier 1 capital ratio and leverage capital ratio were approximately 13.64%, 12.39%, and 9.01%, respectively. 

The Company will hold its regularly scheduled conference call on Thursday January 23, 2014, at 11:00 a.m. (ET).  Participants may listen to the live webcast through the Company's website at www.sunnationalbank.com. Participants are advised to log on 10 minutes ahead of the scheduled start of the call.  An Internet-based replay will be available at the Company's website for two weeks following the call.

Sun Bancorp, Inc. (NASDAQ: SNBC) is a $3.09 billion asset bank holding company headquartered in Vineland, New Jersey, with its executive offices located in Mt. Laurel, New Jersey. Its primary subsidiary is Sun National Bank, a full service commercial bank serving customers through 50-plus locations in New Jersey. Sun National Bank has been named one of Forbes Magazine's "Most Trustworthy Companies" for five years running.  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, concerning the financial condition, results of operations and business of the Company.  Forward-looking statements are statements that include projections, predictions, expectations or beliefs about events or results or otherwise are not statements of historical facts, including statements about reducing problem loans, improving our foundation for future growth, significantly reducing professional fees, improving our profitability through revenue growth and improving operational efficiency..  Actual results and trends could differ materially from those set forth in such statements and there can be no assurances that we will further reduce problem loans, achieve desired future growth, reduce professional fees, improve our profitability, increase revenues or improve our operational efficiency. We caution that such statements are subject to a number of uncertainties, including those detailed under the headings "Risk Factors" and "Management's Discussion and Analysis of Financial Condition and Results of Operations" in the Company's Form 10-K for the fiscal year ended December 31, 2012, its Form 10-Qs for the quarters ended March 31, 2013, June 30, 2013, and September 30, 2013 and in other filings made pursuant to the Securities Exchange Act of 1934, as amended.  Therefore, readers should not place undue reliance on any forward-looking statements.  The Company does not undertake, and specifically disclaims, any obligation to publicly release the results of any revisions that may be made to any forward-looking statements to reflect the occurrence of anticipated or unanticipated events or circumstances after the date of such statements.  

 

Non-GAAP Financial Measures (Unaudited)

This news release references tax-equivalent interest income. Tax-equivalent interest income is a non-GAAP financial measure. Tax-equivalent interest income assumes a 35% marginal federal tax rate for all periods. The fully taxable equivalent adjustments for the three months ended December 31, 2013, September 30, 2013, June 30, 2013, March 31, 2013, and December 31, 2012 were $167 thousand, $167 thousand, $175 thousand, $212 thousand, and $212 thousand, respectively. The fully taxable equivalent adjustments for the year ended December 31, 2013 and December 31, 2012 were $720 thousand and $870 thousand, respectively. This release also references tangible book value per common share. Tangible book value per common share is a non-GAAP financial measure. Tangible book value per common share is a ratio of tangible equity, shareholder's equity less intangible assets, to outstanding common shares. Intangible assets at December 31, 2013, September 30, 2013, June 30, 2013, March 31, 2013, and December 31, 2012 were $39.0 million, $39.4 million, $40.0 million, $40.5 million, and $41.5 million, respectively.

Tax-equivalent interest income

The following reconciles net interest income to net interest income on a fully taxable equivalent basis using a 35% tax rate for the three months ended December 31, 2013, September 30, 2013, June 30, 2013, March 31, 2013, and December 31, 2012 and the year ended December 31, 2013 and December 31, 2012.

 

For Three Months Ended:

December 31, 2013

September 30, 2013

June 30, 2013

March 31, 2013

December 31, 2012

Net interest income

$

21,935

$

22,980

$

21,776

$

23,078

$

23,981

Effect of tax exempt income 

167

167

175

212

212

Net interest income, tax equivalent basis

$

22,102

$

23,147

$

21,951

$

23,290

$

24,193

For the Year Ended:

December 31,

2013

2012

Net interest income

$

89,769

97,848

Effect of tax exempt income

720

870

Net interest income, tax equivalent basis

$

90,489

98,718

Tangible book value per common share

The following reconciles shareholders' equity to tangible equity by reducing shareholders' equity by the intangible asset balance at December, 31, 2013, September 30, 2013, June 30, 2013, March 31, 2013, and December 31, 2012.

December 31, 2013

September 30, 2013

June 30, 2013

March 31, 2013

December 31, 2012

Tangible book value per common share:

      Shareholders' equity

$

245,134

$

257,139

$

261,664

$

264,339

$

262,596

      Less: Intangible assets

38,993

39,448

39,988

40,529

41,450

Tangible equity

$

206,141

$

217,692

$

221,676

$

223,811

$

221,147

      Common stock

88,711

88,618

88,572

88,403

88,301

      Less: Treasury stock

1,997

2,068

2,107

2,107

2,107

Total outstanding shares

86,714

86,550

86,465

86,296

86,194

Tangible book value per common share:

$

2.38

$

2.52

$

2.56

$

2.59

$

2.57

 

 

 

 

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,

2013

2012

2013

2012

Profitability for the period:

    Net interest income

$

21,935

$

23,981

$

89,769

$

97,848

    Provision for loan losses

2,635

24,154

1,647

57,215

    Non-interest income

4,742

6,816

31,681

29,450

    Non-interest expense

32,457

31,597

129,949

120,608

    Loss before income taxes

(8,415)

(24,954)

(10,146)

(50,525)

    Income tax benefit

-

-

-

(34)

    Net loss available to common shareholders

$

(8,415)

$

(24,954)

$

(10,146)

$

(50,491)

Financial ratios:

    Return on average assets(1) 

(1.05)

%

(3.13)

%

(0.31)

%

(1.60)

%

    Return on average equity(1)

(13.11)

%

(34.70)

%

(3.89)

%

(17.19)

%

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

(15.47)

%

(40.61)

%

(4.59)

%

(20.17)

%

    Net interest margin(1)

2.99

%

3.30

%

3.05

%

3.43

%

    Efficiency ratio

121.67

%

102.60

%

107.00

%

94.21

%

    Loss per common share:

        Basic

$

(0.10)

$

(0.29)

$

(0.12)

$

(0.59)

        Diluted 

$

(0.10)

$

(0.29)

$

(0.12)

$

(0.59)

    Average equity to average assets

8.01

%

9.01

%

8.09

%

9.31

%

December 31,

2013

2012

At period-end:

    Total assets

$

3,087,350

$

3,224,031

    Total deposits

2,621,571

2,713,224

    Loans receivable, net of allowance for loan losses

2,101,754

2,230,287

    Loans held-for-sale

21,075

120,935

    Investments

457,797

461,980

    Borrowings

68,765

70,992

    Junior subordinated debentures

92,786

92,786

    Shareholders' equity

245,134

262,595

Credit quality and capital ratios:

    Allowance for loan losses to gross loans held-for-

     investment

1.66

%

2.02

%

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

     held-for-investment

1.78

%

3.64

%

    Non-performing assets to gross loans

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

     owned

1.87

%

4.29

%

    Allowance for loan losses to non-performing loans

     held-for-investment

93.52

%

55.33

%

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

        Sun Bancorp, Inc.

14.40

%

13.72

%

        Sun National Bank

13.64

%

13.02

%

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

        Sun Bancorp, Inc.

12.34

%

11.82

%

        Sun National Bank

12.39

%

11.76

%

Leverage ratio:

        Sun Bancorp, Inc.

8.98

%

9.30

%

        Sun National Bank

9.01

%

9.24

%

    Book value per common share

$

2.83

$

3.05

    Tangible book value per common share

$

2.38

$

2.57

(1) Amounts for the three months ended are annualized.

(2) Return on average tangible equity is computed by dividing annualized net income for the period by average tangible equity. Average tangible equity equals average equity less average identifiable intangible assets and goodwill.

(3) December 31, 2013 capital ratios are estimated, subject to regulatory filings.

 

SUN BANCORP, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION (Unaudited)

(Dollars in thousands, except par value amounts)

December 31,

2013

December 31,

2012

ASSETS

Cash and due from banks

$

64,075

$

77,564

Interest-earning bank balances

229,687

92,052

Cash and cash equivalents

293,762

169,616

Investment securities available for sale (amortized cost of $452,023 and

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

440,097

443,182

Investment securities held to maturity (estimated fair value of $692 and $960 at

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

681

912

Loans receivable (net of allowance for loan losses of $35,537 and $45,873 at

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

2,101,754

2,230,287

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

-

21,922

Loans held-for-sale, at fair value

21,075

99,013

Restricted equity investments, at cost

17,019

17,886

Bank properties and equipment, net

49,095

50,805

Real estate owned

2,503

7,473

Accrued interest receivable

6,612

8,054

Goodwill

38,188

38,188

Intangible assets

805

3,262

Deferred taxes, net

4,872

-

Bank owned life insurance (BOLI)

77,236

76,858

Other assets

33,651

56,573

Total assets

$

3,087,350

$

3,224,031

LIABILITIES AND SHAREHOLDERS' EQUITY

Liabilities:

Deposits

$

2,621,571

$

2,713,224

Securities sold under agreements to repurchase – customers

478

1,968

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

60,956

61,415

Obligations under capital lease

7,331

7,609

Junior subordinated debentures

92,786

92,786

Deferred taxes, net

-

1,509

Other liabilities

59,094

82,925

Total liabilities

2,842,216

2,961,436

Shareholders' equity:

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

-

-

Common stock, $1 par value, 200,000,000 shares authorized; 88,711,035 shares

  issued and 86,714,414 shares outstanding at December 31, 2013; 88,300,637

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

88,711

88,301

Additional paid-in capital

506,719

506,537

Retained deficit

(318,157)

(308,011)

Accumulated other comprehensive (loss) income

(7,055)

2,186

Deferred compensation plan trust

(522)

(256)

Treasury stock at cost, 1,996,621 shares at December 31, 2013; and 2,106,723

  shares at December 31, 2012

(24,562)

(26,162)

Total shareholders' equity

245,134

262,595

Total liabilities and shareholders' equity

$

3,087,350

$

3,224,031

 

 

SUN BANCORP, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF OPERATIONS (Unaudited)

(Dollars in thousands, except per share amounts)

For the Three Months

Ended December 31,

For the Year Ended December 31,

2013

2012

2013

2012

INTEREST INCOME

Interest and fees on loans

$

22,752

$

25,670

$

96,172

$

103,707

Interest on taxable investment securities

2,219

1,860

6,668

9,138

Interest on non-taxable investment securities

310

390

1,338

1,618

Dividends on restricted equity investments

219

235

904

970

Total interest income

25,500

28,155

105,082

115,433

INTEREST EXPENSE

Interest on deposits

2,576

3,143

11,349

13,553

Interest on funds borrowed

444

460

1,776

1,438

Interest on junior subordinated debentures

545

571

2,188

2,594

Total interest expense

3,565

4,174

15,313

17,585

Net interest income

21,935

23,981

89,769

97,848

PROVISION FOR LOAN LOSSES

2,635

24,154

1,647

57,215

Net interest income (loss) after provision for loan losses

19,300

(173)

88,122

40,633

NON-INTEREST INCOME

Service charges on deposit accounts

2,263

2,486

9,056

10,954

Mortgage banking revenue, net

1,000

3,812

11,598

10,551

(Loss) gain on sale of investment securities

-

(196)

3,489

234

Investment products income

599

606

2,684

2,296

BOLI income

466

488

1,882

1,986

Derivative credit valuation adjustment

(710)

(1,750)

(1,588)

(2,275)

Other

1,124

1,270

4,560

4,929

Total non-interest income

4,742

6,716

31,681

28,675

NON-INTEREST EXPENSE

Salaries and employee benefits

13,070

13,331

53,037

54,241

Commission expense

1,098

2,514

7,696

8,259

Occupancy expense

3,406

3,416

13,519

13,011

Equipment expense

1,871

2,005

7,356

7,399

Amortization of intangible assets

455

921

2,457

3,685

Data processing expense

1,223

1,138

4,244

4,384

Professional fees

4,891

1,389

18,246

3,459

Insurance expenses

1,498

1,506

5,966

5,824

Advertising expense

903

1,040

2,830

2,809

Problem loan expense

769

776

3,407

5,681

Real estate owned expense, net

529

1,008

2,270

2,358

Office supplies expense

245

298

857

1,247

Other

2,499

2,155

8,064

7,476

Total non-interest expense

32,457

31,497

129,949

119,833

LOSS BEFORE INCOME TAXES

(8,415)

(24,954)

(10,146)

(50,525)

INCOME TAX BENEFIT

-

-

-

(34)

NET LOSS AVAILABLE TO COMMON SHAREHOLDERS

$

(8,415)

$

(24,954)

$

(10,146)

$

(50,491)

Basic loss per share

$

(0.10)

$

(0.29)

$

(0.12)

$

(0.59)

Diluted loss per share

$

(0.10)

$

(0.29)

$

(0.12)

$

(0.59)

Weighted average shares – basic

86,583,363

86,082,669

86,415,812

85,938,714

Weighted average shares - diluted

86,583,363

86,082,669

86,415,812

85,938,714

 

 

SUN BANCORP, INC. AND SUBSIDIARIES

HISTORICAL TRENDS IN QUARTERLY FINANCIAL DATA (Unaudited)

(Dollars in thousands)

2013

2013

2013

2013

2012

Q4

Q3

Q2

Q1

Q4

Balance sheet at quarter end: 

Cash and cash equivalents

$

293,762

$

453,583

$

442,239

$

311,660

$

169,616

Investment securities

457,797

425,029

361,149

335,844

461,980

Loans held-for-investment: 

        Commercial and industrial

1,587,566

1,636,856

1,676,133

1,737,079

1,725,567

        Home equity 

188,478

192,135

195,938

200,084

207,720

        Second mortgage 

25,279

26,028

27,276

29,235

30,842

        Residential real estate 

305,179

281,537

225,147

248,875

273,413

        Other 

30,789

32,984

34,298

36,287

38,618

            Total gross loans held-for-investment

2,137,291

2,169,540

2,158,792

2,251,560

2,276,160

Allowance for loan losses 

(35,537)

(48,854)

(48,007)

(47,124)

(45,873)

            Net loans held-for-investment

2,101,754

2,120,686

2,110,785

2,204,436

2,230,287

   Loans held-for-sale

21,075

18,707

69,417

41,469

120,935

    Goodwill 

38,188

38,188

38,188

38,188

38,188

    Intangible assets

805

1,260

1,800

2,341

3,262

    Total assets 

3,087,350

3,236,321

3,205,921

3,227,146

3,224,031

    Total deposits

2,621,571

2,752,693

2,722,038

2,723,337

2,713,224

    Securities sold under agreements to

      repurchase - customers

478

554

562

2,726

1,968

    Advances from FHLBNY

60,956

60,997

61,037

61,077

61,415

    Obligations under capital lease

7,331

7,402

7,472

7,541

7,609

    Junior subordinated debentures

92,786

92,786

92,786

92,786

92,786

    Total shareholders' equity

245,134

257,140

261,664

264,341

262,596

Quarterly average balance sheet: 

    Loans(1)

        Commercial and industrial 

$

1,621,222

$

1,671,302

$

1,719,278

$

1,744,553

$

1,788,347

        Home equity

190,394

194,622

197,237

204,311

210,085

        Second mortgage 

26,142

27,041

28,679

30,347

32,442

        Residential real estate

312,977

299,667

307,248

330,916

319,427

        Other

26,134

27,723

28,929

30,410

32,444

            Total gross loans 

2,176,869

2,220,355

2,281,371

2,340,537

2,382,745

    Securities and other interest-earning assets 

782,200

763,575

680,659

607,284

545,781

    Total interest-earning assets 

2,959,069

2,983,930

2,962,030

2,947,821

2,928,526

    Total assets 

3,205,900

3,264,884

3,222,106

3,206,536

3,193,607

    Non-interest-bearing demand deposits 

585,530

549,684

531,210

506,600

511,813

    Total deposits 

2,718,905

2,746,820

2,722,651

2,703,039

2,660,405

    Total interest-bearing liabilities 

2,295,072

2,358,923

2,355,086

2,360,883

2,318,794

    Total shareholders' equity 

256,783

260,701

263,108

263,070

287,698

Capital and credit quality measures:

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

        Sun Bancorp, Inc.

14.40

%

14.72

%

14.80

%

14.21

%

13.72

%

        Sun National Bank

13.64

%

13.96

%

14.05

%

13.50

%

13.02

%

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

        Sun Bancorp, Inc.

12.34

%

12.76

%

12.91

%

12.32

%

11.82

%

        Sun National Bank

12.39

%

12.70

%

12.79

%

12.25

%

11.76

%

    Leverage ratio:

        Sun Bancorp, Inc.

8.98

%

9.13

%

9.43

%

9.40

%

9.30

%

        Sun National Bank

9.01

%

9.09

%

9.33

%

9.33

%

9.24

%

    Average equity to average assets

8.01

%

7.99

%

8.17

%

8.20

%

9.01

%

    Allowance for loan losses to total gross loans

      held-for-investment 

1.66

%

2.25

%

2.22

%

2.09

%

2.02

%

    Non-performing loans held-for-investment to

      gross loans held-for-investment

1.78

%

2.55

%

3.32

%

3.28

%

3.64

%

    Non-performing assets to gross loans

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

      real estate owned

1.87

%

2.76

%

3.51

%

3.57

%

4.29

%

    Allowance for loan losses to non-performing

      loans held-for-investment

93.52

%

88.19

%

66.93

%

63.87

%

55.33

%

Other data:

Net (charge-offs) recoveries

(15,952)

123

2,766

1,080

(26,690)

Non-performing assets:

           Non-accrual loans

$

29,811

$

44,979

$

54,031

$

57,143

$

64,660

           Non-accrual loans held-for-sale

-

-

-

-

10,224

           Troubled debt restructurings, non-accrual

8,166

10,416

17,693

16,640

18,244

           Troubled debt restructurings, held-for-sale

-

-

-

-

2,499

           Loans past due 90 days and accruing

-

-

-

-

-

           Real estate owned, net 

2,503

5,059

6,743

8,472

7,473

                Total non-performing assets

$

40,480

60,454

78,467

$

82,255

$

103,100

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

(2)      December 31, 2013 capital ratios are estimated, subject to regulatory filings.

 

 

SUN BANCORP, INC. AND SUBSIDIARIES

HISTORICAL TRENDS IN QUARTERLY FINANCIAL DATA (Unaudited)

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

2013

2013

2013

2013

2012

Q4

Q3

Q2

Q1

Q4

Profitability for the quarter:

Tax-equivalent interest income

$

25,667

$

26,955

$

25,888

$

27,295

$

28,367

Interest expense

3,565

3,808

3,937

4,005

4,174

Tax-equivalent net interest income

22,102

23,147

21,951

23,290

24,193

Tax-equivalent adjustment

167

167

175

212

212

Provision for loan losses

2,635

724

(1,883)

171

24,154

Non-interest income

4,742

5,799

10,211

10,882

6,716

Non-interest expense excluding

  amortization of intangible assets

32,002

32,377

32,651

30,415

30,576

Amortization of intangible assets

455

540

541

921

921

(Loss) income before income taxes

(8,415)

(4,862)

678

2,453

(24,954)

Net (loss) income

(8,415)

(4,862)

678

2,453

(24,954)

Net (loss) income available to common

  shareholders

$

(8,415)

$

(4,862)

$

678

$

2,453

$

(24,954)

Financial ratios:

Return on average assets (1)

(1.05)

%

(0.60)

%

0.08

%

0.31

%

(3.13)

%

Return on average equity (1)

(13.11)

%

(7.46)

%

1.03

%

3.73

%

(34.70)

%

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

(15.47)

%

(8.80)

%

1.22

%

4.42

%

(40.61)

%

Net interest margin (1)

2.99

%

3.10

%

2.96

%

3.16

%

3.30

%

Efficiency ratio

121.67

%

114.38

%

103.77

%

92.27

%

102.60

%

Per share data:

(Loss) income per common share:

Basic

$

(0.10)

$

(0.06)

$

0.01

$

0.03

$

(0.29)

Diluted

$

(0.10)

$

(0.06)

$

0.01

$

0.03

$

(0.29)

Book value

$

2.83

$

2.97

$

3.03

$

3.06

$

3.05

Tangible book value

$

2.38

$

2.52

$

2.56

$

2.59

$

2.57

Average basic shares

86,583,363

86,499,587

86,323,099

86,245,121

86,082,669

Average diluted shares

86,583,363

86,499,587

86,356,796

86,370,435

86,082,669

Non-interest income:

Service charges on deposit accounts

$

2,263

$

2,314

$

2,250

$

2,229

$

2,486

Mortgage banking revenue, net

1,000

1,593

5,601

3,404

3,812

Net gain (loss) on sale of investment

  securities

-

2

(47)

3,487

(196)

Investment products income

599

678

728

679

606

BOLI income

466

482

486

448

488

Derivative credit valuation adjustment

(710)

(380)

6

(504)

(1,750)

Other income

1,124

1,110

1,187

1,139

1,270

        Total non-interest income

$

4,742

$

5,799

$

10,211

$

10,882

$

6,716

Non-interest expense:

Salaries and employee benefits

$

13,070

$

12,656

$

13,019

$

14,292

$

13,331

    Commission expense

1,098

2,001

2,556

2,041

2,514

    Occupancy expense

3,406

3,456

3,081

3,576

3,416

    Equipment expense

1,871

1,796

1,830

1,859

2,005

    Amortization of intangible assets

455

540

541

921

921

    Data processing expense

1,223

995

1,027

999

1,138

    Professional fees

4,891

5,947

4,761

2,647

1,389

    Insurance expense

1,498

1,496

1,542

1,430

1,506

    Advertising expense

903

676

698

553

1,040

    Problem loan costs

769

816

1,023

799

776

    Real estate owned expense, net

529

252

1,255

234

1,008

    Office supplies expense

245

192

191

229

298

    Other expense

2,499

2,094

1,668

1,756

2,155

       Total non-interest expense

$

32,457

$

32,917

$

33,192

$

31,336

$

31,497

(1) Amounts are annualized.

(2) Return on average tangible equity is computed by dividing annualized net income for the period by average tangible equity. Average tangible equity

equals average equity less average identifiable intangible assets and goodwill.

 

 

SUN BANCORP, INC. AND SUBSIDIARIES

AVERAGE BALANCE SHEETS (Unaudited)

(Dollars in thousands)

 For the Three Months Ended December 31,

2013

2012

Average

Income/

Yield/

Average

Income/

Yield/

Balance

Expense

Cost

Balance

Expense

Cost

Interest-earning assets:

Loans receivable (1),(2):

Commercial and industrial

$

1,621,222

$

17,406

4.29

%

$

1,788,347

$

19,628

4.39

%

Home equity

190,394

1,853

3.89

210,085

2,055

3.91

Second mortgage

26,142

367

5.62

32,442

470

5.79

Residential real estate

312,977

2,671

3.41

319,427

2,959

3.71

Other

26,134

456

6.98

32,444

559

6.89

Total loans receivable

2,176,869

22,753

4.18

2,382,745

25,671

4.31

Investment securities(3)

439,788

2,693

2.45

507,158

2,672

2.11

Interest-earning bank balances

342,412

221

0.26

38,623

24

0.25

Total interest-earning assets

2,959,069

25,667

3.47

2,928,526

28,367

3.87

Non-interest earning assets:

  Cash and due from banks

66,662

72,129

  Bank properties and equipment, net

49,300

51,515

  Goodwill and intangible assets, net

39,190

41,902

  Other assets

91,679

99,535

Total non-interest-earning assets

246,831

265,081

Total assets

$

3,205,900

$

3,193,607

Interest-bearing liabilities:

Interest-bearing deposit accounts:

Interest-bearing demand deposits

$

1,223,184

$

960

0.31

%

$

1,224,254

$

1,178

0.38

%

Savings deposits

268,196

195

0.29

263,949

228

0.35

Time deposits

641,995

1,421

0.89

660,389

1,737

1.05

Total interest-bearing deposit

  accounts

2,133,375

2,575

0.48

2,148,592

3,143

0.59

Short-term borrowings:

Fed Funds Purchased

54

-

-

-

-

-

Securities sold under agreements to

  repurchase - customers

512

-

-

3,250

1

0.12

Long-term borrowings:

FHLBNY advances (4)

60,981

320

2.10

66,527

331

1.99

Obligations under capital lease

7,364

124

6.74

7,639

127

6.65

Junior subordinated debentures

92,786

545

2.35

92,786

571

2.46

Total borrowings

161,697

989

2.45

170,202

1,030

2.42

Total interest-bearing liabilities

2,295,072

3,565

0.62

2,318,794

4,173

0.72

Non-interest bearing liabilities:

  Non-interest-bearing demand deposits

585,530

511,813

  Other liabilities

68,515

75,302

Total non-interest bearing liabilities

654,045

587,115

Total liabilities

2,949,117

2,905,909

Shareholders' equity 

256,783

287,698

Total liabilities and shareholders'

  equity

$

3,205,900

$

3,193,607

Net interest income

$

22,102

$

24,194

Interest rate spread (5)

2.85

%

3.15

%

Net interest margin (6)

2.99

%

3.30

%

Ratio of average interest-earning assets to

  average interest-bearing liabilities

128.93

%

126.30

%

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

(2)  Loan fees are included in interest income and the amount is not material for this analysis.

(3)  Interest earned on non-taxable investment securities is shown on a tax-equivalent basis assuming a 35% marginal federal tax rate for all periods. The fully taxable equivalent adjustments for the three months ended December 31, 2013 and 2012 were $167 thousand and $212 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 December 31,

2013

2012

Average

Income/

Yield/

Average

Income/

Yield/

Balance

Expense

Cost

Balance

Expense

Cost

Interest-earning assets:

Loans receivable (1),(2):

Commercial and industrial

$

1,688,702

$

74,191

4.39

%

$

1,814,626

$

82,165

4.53

%

Home equity

196,597

7,563

3.85

216,218

8,738

4.04

Second mortgage

28,038

1,611

5.75

37,021

2,128

5.75

Residential real estate

312,617

10,846

3.47

207,553

8,199

3.95

Other

28,285

1,961

6.93

35,636

2,477

6.95

Total loans receivable

2,254,239

96,172

4.27

2,311,054

103,707

4.49

Investment securities (3)

413,861

8,884

2.15

537,710

12,529

2.33

Interest-earning bank balances

295,199

746

0.25

28,646

68

0.24

Total interest-earning assets

2,963,299

105,802

3.57

2,877,410

116,304

4.04

Non-interest earning assets:

  Cash and due from banks

70,673

73,000

  Bank properties and equipment, net

49,357

52,781

  Goodwill and intangible assets, net

40,031

43,280

  Other assets

101,593

108,299

Total non-interest-earning assets

261,654

277,360

Total assets

$

3,224,953

$

3,154,770

Interest-bearing liabilities:

Interest-bearing deposit accounts:

Interest-bearing demand deposits

$

1,243,074

$

4,228

0.34

%

$

1,225,609

$

4,778

0.39

%

Savings deposits

268,414

843

0.31

263,307

900

0.34

Time deposits

667,984

6,278

0.94

643,822

7,876

1.22

Total interest-bearing deposit

  accounts

2,179,472

11,349

0.52

2,132,738

13,554

0.64

Short-term borrowings:

Federal funds purchased

14

-

-

5,437

20

0.37

Securities sold under agreements to

  repurchase - customers

1,565

2

0.13

5,157

7

0.14

Long-term borrowings:

FHLBNY advances (4)

61,050

1,275

2.09

37,038

898

2.42

Obligations under capital lease

7,468

499

6.68

7,737

513

6.63

Junior subordinated debentures

92,786

2,188

2.36

92,786

2,594

2.80

Total borrowings

162,883

3,964

2.43

148,155

4,032

2.72

Total interest-bearing liabilities

2,342,355

15,313

0.65

2,280,893

17,586

0.77

Non-interest bearing liabilities:

  Non-interest-bearing demand deposits

543,490

499,435

  Other liabilities

78,209

80,777

Total non-interest bearing liabilities

621,699

580,212

Total liabilities

2,964,054

2,861,105

Shareholders' equity 

260,899

293,665

Total liabilities and shareholders'

  equity

$

3,224,953

$

3,154,770

Net interest income

$

90,489

$

98,718

Interest rate spread (5)

2.92

%

3.27

%

Net interest margin (6)

3.05

%

3.43

%

Ratio of average interest-earning assets to

  average interest-bearing liabilities

126.51

%

126.15

%

(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 year ended December 31, 2013 and 2012 were $720 thousand and $870 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

December 31, 2013

September 30, 2013

Average

Income/

Yield/

Average

Income/

Yield/

Balance

Expense

Cost

Balance

Expense

Cost

Interest-earning assets:

Loans receivable (1),(2):

Commercial and industrial

$

1,621,222

$

17,406

4.29

%

$

1,671,302

$

19,205

4.60

%

Home equity

190,394

1,853

3.89

194,622

1,892

3.89

Second mortgage

26,142

367

5.62

27,041

384

5.68

Residential real estate

312,977

2,671

3.41

299,667

2,620

3.50

Other

26,134

456

6.98

27,723

475

6.85

Total loans receivable

2,176,869

22,753

4.18

2,220,355

24,576

4.43

Investment securities(3)

439,788

2,693

2.45

414,189

2,157

2.08

Interest-earning bank balances

342,412

221

0.26

349,386

222

0.25

Total interest-earning assets

2,959,069

25,667

3.47

2,983,930

26,955

3.61

Non-interest earning assets:

  Cash and due from banks

66,662

72,336

  Bank properties and equipment, net

49,300

48,590

  Goodwill and intangible assets, net

39,190

39,717

  Other assets

91,679

120,311

Total non-interest-earning assets

246,831

280,954

Total assets

$

3,205,900

$

3,264,884

Interest-bearing liabilities:

Interest-bearing deposit accounts:

Interest-bearing demand deposits

$

1,223,184

$

960

0.31

%

$

1,263,160

$

1,064

0.34

%

Savings deposits

268,196

195

0.29

270,394

213

0.32

Time deposits

641,995

1,421

0.89

663,582

1,536

0.93

Total interest-bearing deposit

  accounts

2,133,375

2,575

0.48

2,197,136

2,813

0.51

Short-term borrowings:

Federal funds purchased

54

-

-

-

-

-

Securities sold under agreements to

  repurchase - customers

512

-

-

555

-

-

Long-term borrowings:

FHLBNY advances (4)

60,981

320

2.10

61,011

321

2.10

Obligations under capital lease

7,364

124

6.74

7,435

124

6.67

Junior subordinated debentures

92,786

545

2.35

92,786

550

2.37

Total borrowings

161,697

989

2.45

161,787

995

2.46

Total interest-bearing liabilities

2,295,072

3,565

0.62

2,358,923

3,808

0.65

Non-interest bearing liabilities:

  Non-interest-bearing demand deposits

585,530

549,684

  Other liabilities

68,515

95,576

Total non-interest bearing liabilities

654,045

645,260

Total liabilities

2,949,117

3,004,183

Shareholders' equity 

256,783

260,701

Total liabilities and shareholders'

  equity

$

3,205,900

$

3,264,884

Net interest income

$

22,102

$

23,147

Interest rate spread (5)

2.85

%

2.96

%

Net interest margin (6)

2.99

%

3.10

%

Ratio of average interest-earning assets to

  average interest-bearing liabilities

128.93

%

126.50

%

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

(2)  Loan fees are included in interest income and the amount is not material for this analysis.

(3)  Interest earned on non-taxable investment securities is shown on a tax-equivalent basis assuming a 35% marginal federal tax rate for all periods. The fully taxable equivalent adjustments for the three months ended December 31, 2013 and September 30, 2013 were $167 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

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