Sun Bancorp, Inc. Reports Fourth Quarter and Full Year Results for 2009

Jan 27, 2010, 21:19 ET from Sun Bancorp, Inc.

VINELAND, N.J., Jan. 27 /PRNewswire-FirstCall/ -- Sun Bancorp, Inc. (Nasdaq: SNBC) reported today a net loss available to common shareholders of $6.3 million, or $0.27 per diluted share, for the fourth quarter ended December 31, 2009, compared to net income of $4.3 million, or $0.18 per diluted share, for the fourth quarter of 2008.  During the fourth quarter 2009 the Company recorded a loan loss provision of $19.5 million, or $0.50 per share, and incurred pre-tax other-than-temporary impairment (OTTI) charges of $351,000, or $0.01 per share, which compares to a $7.6 million provision for loan losses, or $0.19 per share, and OTTI charges of $7.5 million, or $0.19 per share, for fourth quarter 2008.  In addition, the fourth quarter 2008 included a net gain on sale of branches of $11.5 million, or $0.29 per share.

For the year ended December 31, 2009, the Company reported a net loss available to common shareholders of $22.4 million, or $0.97 per diluted share, compared to net income of $14.9 million, or $0.62 per diluted share, in the prior year period.

The following were key items which affected the results for the year ended December 31, 2009:

  • Loan loss provision of $46.7 million, or $1.19 per share, as compared to $20.0 million, or $0.49 per share for 2008.
  • OTTI charges of $7.1 million, or $0.18 per share, as compared to $7.5 million, or $0.19 for 2008.
  • A special assessment by the Federal Deposit Insurance Corporation (FDIC) of 5 basis points resulting in a charge of $1.6 million, or $0.04 per share.
  • The Company's participation in the Troubled Asset Relief Program (TARP) which resulted in $5.4 million in preferred stock dividends and discount accretion, or $0.23 per share.

"We are eager to close out one of the most difficult and disappointing economic years in the history of our Country and our Company," said Thomas X.  Geisel, president and chief executive officer of Sun Bancorp.  "Although the current economic, regulatory and banking industry headwinds have not completely subsided, we believe that we have taken all appropriate measures within our control to position Sun Bancorp to return to profitability in 2010.  This is evidenced by the quarterly improvements throughout the year in our core operating and margin performance.  Had there not been an increase over our planned loan loss provision, OTTI charges and the impact of participating in TARP, all largely driven by the uncontrollable effects of the economy, the Company would have been profitable in 2009.  Our principal strategic objective is to emerge from this cycle as the dominant New Jersey-based bank in the markets we serve, while continuing to provide value to our customers and shareholders."

Selected core operating highlights for the quarter continue to reflect favorable trending throughout all of 2009, as follows:

  • The net interest margin was 3.64% for fourth quarter 2009, as compared to 3.36% for linked quarter, 3.01% for the second quarter and 2.74% for first quarter 2009.  The net interest margin was 3.26% for the fourth quarter 2008.  The margin increase throughout 2009 reflects the Company's focus on margin improvement initiatives on both sides of the balance sheet.
  • Net interest income was $28.6 million (tax-equivalent basis) for the fourth quarter 2009 as compared to $27.0 million for the linked quarter, $24.3 million for the second quarter and $22.3 million for first quarter 2009.  Net interest income was $25.9 million for fourth quarter 2008.
  • The yield on average loans was 4.92% for fourth quarter 2009, an increase of 4 basis points from 4.88% for the linked quarter, an increase of 9 basis points from 4.83% for second quarter and an increase of 20 basis points from 4.72% for first quarter 2009.
  • The cost of average interest-bearing deposits was 1.37% for the fourth quarter 2009, a decrease of 22 basis points from 1.59% for the linked quarter, a decrease of 58 basis points from 1.95% for the second quarter and a decrease of 82 basis points from 2.19% for the first quarter.  The cost of average interest-bearing deposits also decreased 113 basis points from 2.50% for the fourth quarter 2008.

Other key financial highlights include:

  • Total assets were $3.58 billion at December 31, 2009, as compared to $3.55 billion at September 30, 2009 and $3.62 billion at December 31, 2008.
  • Total loans before allowance for loan losses were $2.72 billion at December 31, 2009, as compared to $2.71 billion at September 30, 2009 and $2.74 billion at December 31, 2008. Commercial loans, on average, were essentially level on a linked quarter basis, residential mortgages and home equity loans decreased on average 1.0% and 1.8%, respectively.
  • The provision for loan losses was $19.5 million for the fourth quarter, increasing the allowance for loan losses to 2.21% of outstanding loans at December 31, 2009 as compared to 1.70% at September 30, 2009 and 1.36% at December 31, 2008.  The provision for loan losses for the fourth quarter was 0.72% of average loans, as compared to 0.59% of average loans for the linked third quarter 2009 and 0.28% of average loans for the comparable prior year quarter.  Net charge-offs during the fourth quarter were $5.6 million, or 0.21% of average loans, as compared to $14.5 million, or 0.53% of average loans, for the linked quarter and $4.4 million, or 0.16% of average loans outstanding, for the comparable prior year quarter.  The provision for loan losses for the year ended December 31, 2009 was $46.7 million, or 1.71% of average loans, as compared to $20.0 million, or 0.77% of average loans, for the same period in 2008.  Net charge-offs for the year ended December 31, 2009 was $24.0 million, or 0.88% of average loans, as compared to $9.7 million, or 0.37% of average loans, for the comparable prior year.
  • Total non-performing assets were $105.4 million at December 31, 2009, or 3.86% of total loans and real estate owned, as compared to $94.1 million at September 30, 2009, or 3.46% of total loans and real estate owned, and $48.8 million, or 1.78%, at December 31, 2008.  The allowance for loan losses to non-performing loans was 62.56% at December 31, 2009, as compared to 54.58% at September 30, 2009, and 79.69% at December 31, 2008.
  • Total deposits were $2.91 billion at December 31, 2009, which were essentially level with September 30, 2009 and December 31, 2008, which were at $2.93 billion and $2.90 billion, respectively.  Average deposits declined $60.0 million over the linked quarter as average certificates of deposit decreased $125.5 million, or 11.9%, offset by an increase in average core deposits of $65.5 million, or 3.5%.
  • The fourth quarter net interest margin was 3.64%, as compared to 3.36% for the linked quarter and 3.26% for the fourth quarter 2008.  The net interest margin was 3.18% for the year ended December 31, 2009, as compared to 3.30% for the prior year.  The interest rate spread as compared to the linked third quarter increased 35 basis points to 3.41%, with a yield increase of 11 basis points on interest-earnings assets, offset by a decrease in the cost of interest-bearing liabilities of 24 basis points.  Average interest-earning assets for the quarter of $3.15 billion remained relatively stable from prior year quarter, while decreasing 2.2% over the linked quarter.  The interest rate spread for the year ended December 31, 2009 was 2.87%, as compared to 2.83% for the comparable prior year.
  • Total operating non-interest income for the quarter ended December 31, 2009 of $5.9 million decreased $512,000, or 8.0%, over the linked quarter and $227,000, or 3.7%, over the comparable prior year period.  The decrease over the linked quarter was primarily due to a decrease in investment products income of $397,000 as a result of lower volume and a decrease in gain on sale of loans of $108,000, primarily related to SBA loans.  The decrease over the comparable prior year period was primarily attributable to a decrease in gain on derivative instruments of $361,000 due to a planned decline in transaction volume, a decrease in investment products income of $191,000 as a result of lower volume and a reduction in service charges on deposit accounts, such as cycle service, NSF and overdraft fees, of $113,000.  These decreases were offset with an increase in gain on sale of loans of $399,000 primarily related to mortgages sold in the secondary market.  Total operating non-interest income for the year ended December 31, 2009 decreased $4.0 million, or 14.0%, to $24.2 million from $28.1 million in 2008.  The decrease over prior year was primarily attributable to a reduction in service charges on deposit accounts of $1.5 million, a decrease in gain on derivative instruments of $2.3 million due to a planned decline in transaction volume, a decrease in bank owned life insurance (BOLI) income of $768,000 due to lower yields earned on the separate account policy and a decrease in investment products income of $372,000 as a result of customer migration toward lower yielding commission products.  These decreases were offset by an increase in gain on sale of loans of $1.0 million related to mortgages sold in the secondary market.
  • Total operating non-interest expense for the quarter ended December 31, 2009 decreased $1.3 million, or 4.7%, to $25.6 million in comparison to the linked quarter and increased $2.9 million, or $12.7%, over the comparable prior year period.  Salaries and benefits decreased $1.7 million and cost of real estate owned decreased $826,000 in comparison to the linked third quarter.  These decreases were primarily attributed to non-recurring charges recognized during the third quarter, which included severance and other related charges of $934,000 and an $800,000 write-down on the carrying value of one commercial property.  These decreases were offset by an increase in advertising expense of $535,000 stemming from brand awareness and customer acquisition campaigns in the fourth quarter, an increase in off-balance sheet reserves of $239,000 and an increase in consulting fees of $219,000.  The increase over the prior year period was primarily attributable to an increase in salaries and benefits of $1.8 million and insurance expense of $611,000.  Salaries and benefits increased due to the addition of several key management and business line staff, and severance and other related charges, while insurance expense increased primarily due to higher FDIC assessment rates, additional coverage under the Temporary Liquidity Guarantee Program (TLGP) and an overall increase in assessable deposits.  Further increases over the prior year period included additional off-balance sheet reserves of $276,000 and problem loan costs of $225,000.  Total operating non-interest expense for the year ended December 31, 2009 increased $11.6 million, or 12.6%, to $103.9 million over the prior year 2008.  Salaries and benefits increased $4.4 million due to the addition of several key management and business line staff, severance and other related charges, and an increase in health benefits.  Insurance expense increased $4.8 million primarily due to higher FDIC assessment rates, additional coverage under the Temporary Liquidity Guarantee Program (TLGP) and an overall increase in assessable deposits.  In addition, cost of real estate owned increased $1.8 million as a result of the write-down of two properties for a total of $950,000 combined with an overall net gain of $589,000 recognized on the sale of four other real estate properties during 2008.
  • The income tax benefit is a result of the pre-tax loss in combination with the relatively large levels of tax-free income earned on tax-exempt securities and BOLI policies.
  • The Company's ratio of tangible equity to tangible assets was 6.25% at December 31, 2009, as compared to 6.45% at September 30, 2009, and 6.10% at December 31, 2008.
  • The Company's capital ratios continue to remain strong and Sun National Bank is "well capitalized" by all regulatory standards.  At December 31, 2009 Sun National Bank's total risk-based capital ratio is approximately 10.80% and the leverage capital ratio is approximately 8.62%.

The Company will hold its regularly scheduled conference call on Thursday, January 28, 2010, at 11:00 a.m.  (ET).  Participants may listen to the live Web cast through the Sun Bancorp Web site at www.sunnb.com.  Participants are advised to log on 10 minutes ahead of the scheduled start of the call.  An Internet-based replay will be available at the Web site for two weeks following the call.

Sun Bancorp, Inc. is a $3.6 billion asset bank holding company headquartered in Vineland, New Jersey.  Its primary subsidiary is Sun National Bank, serving customers through 70 locations in New Jersey.  The Bank is an Equal Housing Lender and its deposits are insured up to the legal maximum by the FDIC.  For more information about Sun National Bank and Sun Bancorp, Inc., visit www.sunnb.com.

The foregoing material contains forward-looking statements concerning the financial condition, results of operations and business of the Company.  We caution that such statements are subject to a number of uncertainties and actual results could differ materially, and, therefore, readers should not place undue reliance on any forward-looking statements.  The Company does not undertake, and specifically disclaims, any obligation to publicly release the results of any revisions that may be made to any forward-looking statements to reflect the occurrence of anticipated or unanticipated events or circumstances after the date of such statements.


SUN BANCORP, INC. AND SUBSIDIARIES


FINANCIAL HIGHLIGHTS (Unaudited)


(Dollars in thousands, except per share data)




For the Three Months Ended


For the Year Ended




December 31,


December 31,




2009   


2008   


2009   


2008   


Profitability for the period:










    Net interest income


$

28,068


$

25,472


$

100,157


$

99,661


    Provision for loan losses



19,479



7,617



46,666



20,000


    Non-interest income



5,541



10,076



17,070



32,299


    Non-interest expense



25,594



22,712



103,928



92,640


    (Loss) income before income taxes



(11,464)



5,219



(33,367)



19,320


    Net (loss) income



(6,254)



4,253



(17,045)



14,894


Net (loss) income available to common

 shareholders


$

(6,254)


$

4,253


$

(22,396)


$

14,894
















Financial ratios:














    Return on average assets (1) 



(0.70)

%


0.49

%


(0.47)

%


0.44

%

    Return on average equity (1)



(6.86)

%


4.71

%


(4.42)

%


4.09

%

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



(11.28)

%


7.94

%


(7.06)

%


6.92

%

    Net interest margin (1)



3.64

%


3.26

%


3.18

%


3.30

%

    Efficiency ratio



76.15

%


63.89

%


88.66

%


70.20

%

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



75.37

%


71.89

%


83.58

%


72.24

%















    Earnings per common share (4):














        Basic


$

(0.27)


$

0.18


$

(0.97)


$

0.63


        Diluted 


$

(0.27)


$

0.18


$

(0.97)


$

0.62
















    Average equity to average assets



10.15

%


10.38

%


10.69

%


10.72

%







December 31,



2009

2008


At period-end:




    Total assets

$

3,578,852   


$

3,622,126   


    Total deposits


2,909,268   



2,896,364   


    Loans receivable, net of allowance for loan losses


2,657,694   



2,702,516   


    Investments


457,192   



453,584   


    Borrowings


146,193   



154,097   


    Junior subordinated debentures


92,786   



92,786   


    Shareholders' equity


356,654   



358,508   









Credit quality and capital ratios:







    Allowance for loan losses to gross loans


2.21   

%


1.36   

%

    Non-performing assets to gross loans and real estate owned


3.86   

%


1.78   

%

    Allowance for loan losses to non-performing loans


62.56   

%


79.69   

%








Total capital (to risk-weighted assets) (5):







Sun Bancorp, Inc.


11.31   

%


11.37   

%

Sun National Bank


10.80   

%


10.84   

%

Tier 1 capital (to risk-weighted assets) (5):







Sun Bancorp, Inc.


10.05   

%


10.17   

%

Sun National Bank


9.54   

%


9.64   

%

Leverage ratio (5):







Sun Bancorp, Inc.


9.08   

%


9.58   

%

Sun National Bank


8.62   

%


9.10   

%








    Book value (4)

$

15.29   


$

15.57   


    Tangible book value (4)

$

9.19   


$

9.20   



(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) Efficiency ratio, excluding non-operating income and non-operating expense, is computed by dividing non-interest expense for the period by the summation of net interest income and non-interest income.   Net interest income for the year ended December 31, 2008 excludes the write-off of $791,000 of unamortized costs on redeemed trust preferred securities. Non-interest income for the three months and year ended December 31, 2009 exclude a net impairment loss on available for sale securities of $351,000 and $7.1 million, respectively.  Non-interest income for the three months and year ended December 31, 2008 excludes a net gain of $11.5 million on the sale of branches and bank property and an impairment charge of $7.5 million on available for sale securities.  Non-interest income for the year ended December 31, 2008 also excludes a gain on redemption of Visa stock of $207,000. Non-interest expense for the year ended December 31, 2008 excludes a $250,000 executive sign-on incentive and $72,000 in lease buyout charges.

(4) Data is adjusted for a 5% stock dividend issued in May 2009.

(5) December 31, 2009 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)







December 31,



2009


2008


ASSETS






    Cash and due from banks


$

53,857 


$

31,237 


    Interest-earning bank balances



5,263 



26,784 


    Federal funds sold





412 


Cash and cash equivalents



59,120 



58,433 


    Investment securities available for sale  (amortized cost of $435,267 and $444,628 at December 31, 2009 and 2008, respectively)



434,738 



423,513 


    Investment securities held to maturity  (estimated fair value of $7,121 and $13,601 at December 31, 2009 and 2008, respectively)



6,955 



13,765 


    Loans receivable (net of allowance for loan losses of $59,953 and $37,309 at December 31, 2009 and 2008, respectively)



2,657,694 



2,702,516 


    Restricted equity investments



15,499 



16,306 


    Bank properties and equipment, net



53,246 



48,642 


    Real estate owned, net



9,527 



1,962 


    Accrued interest receivable



12,235 



12,254 


    Goodwill



127,894 



127,894 


    Intangible assets, net



14,316 



18,769 


    Deferred taxes, net



20,706 



16,707 


    Bank owned life insurance (BOLI)



77,753 



75,504 


    Other assets



89,169 



105,861 


Total assets


$

3,578,852 


$

3,622,126 










LIABILITIES & SHAREHOLDERS' EQUITY








LIABILITIES








    Deposits


$

2,909,268 


$

2,896,364 


    Federal funds purchased



89,000 



71,500 


    Securities sold under agreements to repurchase - customers



18,677 



20,327 


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



15,215 



42,081 


    Securities sold under agreements to repurchase - FHLBNY



15,000 



15,000 


    Obligations under capital lease



8,301 



5,189 


    Junior subordinated debentures



92,786 



92,786 


    Other liabilities



73,951 



120,371 


Total liabilities



3,222,198 



3,263,618 










SHAREHOLDERS' EQUITY








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






Common stock, $1 par value, 50,000,000 shares authorized; 25,435,994 shares issued and 23,329,271 shares outstanding at December 31, 2009; 24,037,431 shares issued and 21,930,708 shares outstanding at December 31, 2008



25,436 



24,037 


Additional paid-in capital



362,164 



351,430 


Retained earnings



(4,512)



22,580 


Accumulated other comprehensive loss



(149)



(13,377)


Deferred compensation plan trust 



(123)




Treasury stock at cost, 2,106,723 shares at December 31, 2009 and 2008



(26,162)



(26,162)


Total shareholders' equity



356,654 



358,508 


Total liabilities and shareholders' equity


$

3,578,852 


$

3,622,126 







SUN BANCORP, INC.

CONSOLIDATED STATEMENTS OF INCOME (Unaudited)

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


For the Three Months Ended

December 31,

For the Year Ended

December 31,


    2009


2008

2009


2008

INTEREST INCOME











Interest and fees on loans

$

33,324 

$

38,050 

$

131,811 

$

154,154 

Interest on taxable investment securities


3,286 


4,043 


14,627 


15,976 

Interest on non-taxable investment securities


1,034 


822 


3,729 


3,256 

Dividends on restricted equity investments


223 


187 


832 


983 

Interest on federal funds sold



31 



265 

Total interest income


37,867 


43,133 


150,999 


174,634 

INTEREST EXPENSE









Interest on deposits


8,225 


15,677 


44,357 


65,852 

Interest on funds borrowed


550 


527 


2,061 


3,407 

Interest on junior subordinated debentures


1,024 


1,457 


4,424 


5,714 

Total interest expense


9,799 


17,661 


50,842 


74,973 

Net interest income


28,068 


25,472 


100,157 


99,661 

PROVISION FOR LOAN LOSSES


19,479 


7,617 


46,666 


20,000 

Net Interest income after provision for loan losses


8,589 


17,855 


53,491 


79,661 

NON-INTEREST INCOME









Service charges on deposit

 accounts


3,150 


3,263 


12,440 


13,918 

Other service charges


85 


82 


331 


317 

Gain on sale of loans


603 


204 


2,352 


1,325 

Gain on derivative instruments


50 


411 


262 


2,578 

Investment products income


497 


688 


2,669 


3,041 

BOLI income


600 


661 


2,249 


3,017 

Net gain on sale of branches



11,454 



11,454 

Net impairment losses on available for sale securities  (1)









Total impairment losses


(2,615)


(7,497)


(9,379)


(7,497)

Portion of loss recognized in other comprehensive income (before taxes)


2,264 



2,264 


Net impairment losses recognized in earnings


(351)


(7,497)


(7,115)


(7,497)

Other


907 


810 


3,882 


4,146 

Total non-interest income


5,541 


10,076 


17,070 


32,299 

NON-INTEREST EXPENSE









Salaries and employee benefits


12,415 


10,643 


51,748 


47,623 

Occupancy expense


2,797 


2,919 


11,403 


11,683 

Equipment expense


1,732 


1,609 


6,574 


6,421 

Data processing expense


1,021 


1,120 


4,063 


4,459 

Amortization of intangible assets


921 


1,178 


4,453 


4,710 

Insurance expense


1,512 


901 


7,804 


3,043 

Professional fees


713 


745 


2,193 


2,335 

Advertising expense


786 


849 


2,453 


2,368 

Real estate owned expense (income), net


28 


(116)


1,155 


(628)

Other


3,669 


2,864 


12,082 


10,626 

Total non-interest expense


25,594 


22,712 


103,928 


92,640 

(LOSS) INCOME BEFORE INCOME TAXES


(11,464)


5,219 


(33,367)


19,320 

INCOME TAX (BENEFIT) EXPENSE 


(5,210)


966 


(16,322)


4,426 

NET (LOSS) INCOME


(6,254)


4,253 


(17,045)


14,894 

Preferred stock dividends and discount accretion




5,351 


NET (LOSS) INCOME AVAILABLE TO COMMON SHAREHOLDERS

$

(6,254)

$

4,253 

$

(22,396)

$

14,894 










Basic (loss) earnings per share (2)

$

(0.27)

$

0.18 

$

(0.97)

$

0.63 

Diluted (loss) earnings per share (2)

$

(0.27)

$

0.18 

$

(0.97)

$

0.62 

Weighted average shares – basic (2)


23,223,463 


23,323,693 


23,134,424 


23,647,009 

Weighted average shares – diluted (2)


23,223,463 


23,410,606 


23,134,424 


23,958,224 

(1)  For the three months and year ended December 31, 2009, the OTTI is recognized in accordance with the new guidance impacting Financial Accounting Standards Board Accounting Standards Codification 320-10, which was adopted on January 1, 2009.  The OTTI for periods prior to January 1, 2009 are recognized based on guidance in effect prior to the adoption of the new guidance.



(2) Data is adjusted for a 5% stock dividend issued in May 2009.





SUN BANCORP, INC. AND SUBSIDIARIES


HISTORICAL TRENDS IN QUARTERLY FINANCIAL DATA (Unaudited)


(Dollars in thousands)



2009

Q4


2009

Q3


2009

Q2


2009

Q1


2008

Q4








Balance sheet at quarter end: 











Loans: 











        Commercial and industrial

$

2,249,365


$

2,234,616


$

2,240,368


$

2,243,698


$

2,234,202


        Home equity 


258,592



261,206



  265,407



268,122



274,360


        Second mortgage 


68,592



71,578



  73,856



78,589



84,388


        Residential real estate 


75,322



72,292



  79,627



69,971



67,473


        Other 


65,776



70,072



  74,714



77,638



79,402


            Total gross loans


2,717,647



2,709,764



2,733,972



2,738,018



2,739,825


Allowance for loan losses 


(59,953)



(46,067)



  (44,316)



(39,406)



(37,309)


            Net loans 


2,657,694



2,663,697



2,689,656



2,698,612



2,702,516


    Goodwill 


127,894



127,894



  127,894



127,894



127,894


    Intangible assets, net 


14,316



15,237



  16,414



17,592



18,769


    Total assets 


3,578,852



3,545,639



3,561,110



3,635,697



3,622,126


    Total deposits


2,909,268



2,932,880



2,875,502



2,930,084



2,896,364


    Federal funds purchased


89,000



6,000



  87,500



-



71,500


    Securities sold under agreements to repurchase - customers


18,677



21,018



  17,398



14,170



20,327


    Advances from FHLBNY


15,215



15,512



  15,805



16,096



42,081


    Securities sold under agreements to repurchase - FHLBNY


15,000



15,000



  15,000



15,000



15,000


    Obligations under capital lease


8,301



8,343



  8,383



5,171



5,189


    Junior subordinated debentures


92,786



92,786



  92,786



92,786



92,786


    Total shareholders' equity


356,654



362,457



  360,660



447,984



358,508


Quarterly average balance

sheet: 
















    Loans: 
















        Commercial and industrial 

$

2,238,579


$

2,247,234


$

2,236,745


$

2,229,016


$

2,195,218


        Home equity


260,382



263,494



  268,276



268,921



275,791


        Second mortgage 


69,844



72,830



  75,967



81,854



85,530


        Residential real estate 


75,890



76,626



  75,812



70,868



62,481


        Other


66,698



70,790



  75,133



79,324



81,426


            Total gross loans 


2,711,393



2,730,974



2,731,933



2,729,983



2,700,446


    Securities and other interest-earning assets 


433,706



486,274



  491,348



527,318



476,305


    Total interest-earning assets 


3,145,099



3,217,248



3,223,281



3,257,301



3,176,751


    Total assets 


3,590,339



3,593,037



3,611,679



3,644,558



3,483,145


    Non-interest-bearing demand deposits 


480,080



476,478



  431,836



397,237



407,151


    Total deposits 


2,886,322



2,946,281



2,975,358



2,936,452



2,916,153


    Total interest-bearing liabilities 


2,652,540



2,663,226



2,705,069



2,694,326



2,679,673


    Total shareholders' equity 


364,531



365,440



  370,196



445,040



361,513


















Capital and credit quality measures:
















Total capital (to risk-weighted

 assets) (1):
















        Sun Bancorp, Inc.


11.31

%


11.48

%


  11.62

%


14.32

%


11.37

%

        Sun National Bank


10.80

%


10.99

%


  11.15

%


10.99

%


10.84

%

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
















        Sun Bancorp, Inc.


10.05

%


10.23

%


  10.37

%


13.07

%


10.17

%

        Sun National Bank


9.54

%


9.74

%


  9.90

%


9.74

%


9.64

%

    Leverage ratio (1):
















        Sun Bancorp, Inc.


9.08

%


9.21

%


  9.29

%


11.81

%


9.58

%

        Sun National Bank


8.62

%


8.78

%


  8.88

%


8.80

%


9.10

%

















    Average equity to average assets


10.15

%


10.17

%


  10.25

%


12.21

%


10.38

%

    Allowance for loan losses to total gross loans 


2.21

%


1.70

%


  1.62

%


1.44

%


1.36

%

    Non-performing assets to total gross loans and real estate owned


3.86

%


3.46

%


  2.70

%


2.34

%


1.78

%

    Allowance for loan losses to non-performing loans


62.56

%


54.58

%


  69.82

%


73.76

%


79.69

%

















    Other data:
















Net charge-offs


(5,593)



(14,486)



  (2,040)



(1,903)



(4,428)


Non-performing assets:
















            Non-accrual loans

$

87,882


$

80,333


$

  55,801


$

50,481


$

42,233


            Loans past due 90 days and accruing


7,958



4,067



  7,675



2,945



4,587


            Real estate owned, net 


9,527



9,667



  10,620



10,834



1,962


                Total non-performing

                assets

$

105,367


$

94,067


$

  74,096


$

64,260


$

48,782


(1) December 31, 2009 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 data)


2009


2009


2009


2009


2008


Q4


Q3


Q2


Q1


Q4

Profitability for the quarter:










Tax-equivalent interest income

$

38,425   


$

38,413   


$

38,276   


$

37,894   


$

43,574   

Interest expense


9,799   



11,426   



14,017   



15,600   



17,661   

Tax-equivalent net interest income


28,626   



26,987   



24,259   



22,294   



25,913   

Tax-equivalent adjustment


558   



521   



475   



455   



441   

Provision for loan losses


19,479   



16,237   



6,950   



4,000   



7,617   

Non-interest income excluding net gain on sale of branches and net impairment losses on available for sale securities


5,892   



6,404   



6,290   



5,599   



6,119   

Net gain on sale of branches


-   



-   



-   



-   



11,454   

Net impairment losses on available for sale securities


(351)  



(1,928)  



(4,558)  



(278)  



(7,497)  

Non-interest expense excluding amortization of intangible assets


24,673   



25,690   



26,472   



22,640   



21,534   

Amortization of intangible assets


921   



1,177   



1,178   



1,177   



1,178   

(Loss) income before income taxes


(11,464)  



(12,162)  



(9,084)  



(657)  



5,219   

Income tax (benefit) expense


(5,210)  



(5,620)  



(4,450)  



(1,042)  



966   

Net (loss) income


(6,254)  



(6,542)  



(4,634)  



385   



4,253   

Net (loss) income available to

 common shareholders

$

(6,254)  


$

(6,542)  


$

(8,780)  


$

(820)  


$

4,253   

Financial ratios:















Return on average assets (1)


(0.70) %



(0.73) %



(0.51) %



0.04 %



0.49 %

Return on average equity (1)


(6.86) %



(7.16) %



(5.01) %



0.35 %



4.71 %

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


(11.28) %



(11.81) %



(8.23) %



0.52 %



7.94 %

Net interest margin (1)


3.64 %



3.36 %



3.01 %



2.74 %



3.26 %

Efficiency ratio


76.15 %



86.83 %



108.36 %



87.69 %



63.89  %

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


75.37 %



81.74 %



91.94 %



86.80 %



71.89 %

Per share data (3):















(Loss) earnings per common

  share:















Basic

$

(0.27)  


$

(0.28)  


$

(0.38)  


$

(0.04)  


$

0.18   

Diluted

$

(0.27)  


$

(0.28)  


$

(0.38)  


$

(0.04)  


$

0.18   

Book value

$

15.29   


$

15.63   


$

15.59   


$

15.72   


$

15.57   

Tangible book value

$

9.19   


$

9.46   


$

9.35   


$

9.41   


$

9.20   

Average basic shares (3)

23,223,463   


23,162,992   


23,103,975   


23,043,056   


23,323,693   

Average diluted shares (3)

23,223,463   


23,162,992   


23,103,975   


23,043,056   


23,410,606   

Operating non-interest income:















Service charges on deposit accounts

$

3,150   


$

3,150   


$

3,096   


$

3,044   


$

3,263   

Other service charges


85   



85   



79   



82   



82   

Gain on sale of loans


603   



711   



693   



345   



204   

Gain on derivative instruments


50   



-   



85   



127   



411   

Investment products income


497   



894   



756   



522   



688   

BOLI income


600   



575   



561   



513   



661   

Other income


907   



989   



1,020   



966   



810   

        Total operating non-interest

         income


5,892   



6,404   



6,290   



5,599   



6,119   

Non-operating income (4):















Net gain on sale of branches


-   



-   



-   



-   



11,454   

Net impairment losses on available for sale securities recognized in earnings


(351)  



(1,928)  



(4,558)  



(278)  



(7,497)  

        Total non-operating income


(351)  



(1,928)  



(4,558)  



(278)  



3,957   

        Total non-interest income

$

5,541   


$

4,476   


$

1,732   


$

5,321   


$

10,076   

Operating non-interest expense:















    Salaries and employee benefits

$

12,415   


$

14,154   


$

13,216   


$

11,963   


$

10,643   

    Occupancy expense


2,797   



2,689   



2,782   



3,135   



2,919   

    Equipment expense


1,732   



1,619   



1,685   



1,538   



1,609   

    Data processing expense


1,021   



980   



1,052   



1,010   



1,120   

    Amortization of intangible assets


921   



1,177   



1,178   



1,177   



1,178   

Insurance expense


1,512   



1,519   



3,330   



1,443   



901   

    Professional fees


713   



595   



507   



378   



745   

    Advertising expense


786   



251   



871   



545   



849   

Real estate owned expense

 (income), net


28   



854   



93   



180   



(116)  

    Other expenses


3,669   



3,029   



2,936   



2,448   



2,864   

        Total operating non-interest

        expense


25,594   



26,867   



27,650   



23,817   



22,712   

        Total non-interest expense

$

25,594   


$

26,867   


$

27,650   


$

23,817   


$

22,712   

(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) Data is adjusted for a 5% stock dividend issued in May 2009.

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






SUN BANCORP, INC. AND SUBSIDIARIES

AVERAGE BALANCE SHEETS (Unaudited)

(Dollars in thousands)




For the Three Months Ended

December 31, 2009



For the Three Months Ended

December 31, 2008




Average


Income/


Yield/



Average


Income/


Yield/




Balance


Expense


Cost



Balance


Expense


Cost


Interest-earning assets:















Loans receivable (1),(2):















Commercial and industrial


$ 2,238,579


$ 26,939


4.81

%


$ 2,195,218


$ 30,604


5.58

%

Home equity


260,382


3,139


4.82



275,791


3,694


5.36


Second mortgage


69,844


1,130


6.47



85,530


1,396


6.53


Residential real estate


75,890


971


5.12



62,481


962


6.16


Other


66,698


1,145


6.87



81,426


1,394


6.85


Total loans receivable


2,711,393


33,324


4.92



2,700,446


38,050


5.64


Investment securities (3)


425,637


5,099


4.79



428,159


5,417


5.06


Interest-earning bank balances


8,069


2


0.10



34,299


76


0.89


Federal funds sold


-


-


-



13,847


31


0.90


Total interest-earning assets


3,145,099


38,425


4.89



3,176,751


43,574


5.49


Cash and due from banks


97,729







51,709






Bank properties and equipment, net


53,147







48,247






Goodwill and intangible assets, net


142,778







147,380






Other assets


151,586







59,058






Total non-interest-earning assets


445,240







306,394






Total assets


$ 3,590,339







$ 3,483,145





















Interest-bearing liabilities:















Interest-bearing deposit accounts:















Interest-bearing demand deposits


$ 1,175,432


2,703


0.92

%


$ 1,012,525


3,808


1.50

%

Savings deposits


299,055


673


0.90



318,720


1,309


1.64


Time deposits


931,755


4,849


2.08



1,177,757


10,560


3.59


Total interest-bearing deposit accounts


2,406,242


8,225


1.37



2,509,002


15,677


2.50


Short-term borrowings:















Federal funds purchased


94,366


53


0.22



9,810


17


0.69


Securities sold under agreements to repurchase - customers


20,508


10


0.20



29,989


33


0.44


Long-term borrowings:















FHLBNY advances (4)


30,316


349


4.60



32,890


382


4.65


Obligations under capital lease


8,322


138


6.63



5,196


95


7.31


Junior subordinated debentures


92,786


1,024


4.41



92,786


1,457


6.28


Total borrowings


246,298


1,574


2.56



170,671


1,984


4.65


Total interest-bearing liabilities


2,652,540


9,799


1.48



2,679,673


17,661


2.64


Non-interest-bearing demand deposits


480,080







407,151






Other liabilities


93,188







34,808






           Total non-interest bearing liabilities


573,268







441,959






Total liabilities


3,225,808







3,121,632






Shareholders' equity 


364,531







361,513






           Total liabilities and shareholders' equity


$ 3,590,339







$ 3,483,145





















Net interest income




$ 28,626







$ 25,913




Interest rate spread (5)






3.41

%






2.85

%

Net interest margin (6)






3.64

%






3.26

%

Ratio of average interest-earning assets to

average interest-bearing liabilities






118.57

%






118.55

%



(1)  Average balances include non-accrual loans.


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


(3)  Interest earned on non-taxable investment securities is shown on a tax equivalent basis assuming a 35% marginal federal tax rate for all periods. The fully taxable equivalent adjustment for three months ended December 31, 2009 and 2008 was $558,000 and $441,000, 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, 2009



For the Year Ended

December 31, 2008


Average

Income/

Yield/


Average

Income/

Yield/


Balance

Expense

Cost


Balance

Expense

Cost

Interest-earning assets:












Loans receivable (1),(2):












Commercial and industrial


$ 2,237,940   


$ 104,713   


4.68%


$ 2,119,795   


$ 123,693   


5.84%

Home equity


265,240   


13,219   


4.98   


269,336   


15,574   


5.78   

Second mortgage


75,084   


4,845   


6.45   


83,348   


5,433   


6.52   

Residential real estate


74,823   


4,235   


5.66   


55,598   


3,509   


6.31   

Other


72,946   


4,799   


6.58   


84,575   


5,945   


7.03   

Total loans receivable


2,726,033   


131,881   


4.84   


2,612,652   


154,154   


5.90   

Investment securities (3)


442,868   


21,114   


4.77   


433,226   


21,707   


5.01   

Interest-earning bank balances


40,029   


83   


0.21   


15,967   


260   


1.63   

Federal funds sold


94   


-   


-   


15,279   


265   


1.73   

Total interest-earning assets


3,209,024   


153,008   


4.77   


3,077,124   


176,386   


5.73   

Cash and due from banks


60,687   






56,104   





Bank properties and equipment, net


50,522   






48,179   





Goodwill and intangible assets, net


144,461   






149,150   





Other assets


145,015   






69,855   





Total non-interest-earning assets


400,685   






323,288   





Total assets


$ 3,609,709   






$ 3,400,412   


















Interest-bearing liabilities:













Interest-bearing deposit accounts:













Interest-bearing demand deposits


$ 1,073,337   


10,672   


0.99%


$ 874,463   


14,355   


1.64%

Savings deposits


297,820   


2,937   


0.99   


395,288   


7,632   


1.93   

Time deposits


1,118,120   


30,748   


2.75   


1,110,941   


43,865   


3.95   

Total interest-bearing deposit accounts


2,489,277   


44,357   


1.78   


2,380,692   


65,852   


2.77   

Short-term borrowings:













Federal funds purchased


39,607   


114   


0.29   


18,370   


421   


2.29   

Securities sold under agreements to repurchase - customer


17,997   


42   


0.23   


34,976   


478   


1.37   

Long-term borrowings:













FHLBNY advances (4)


32,178   


1,439   


4.47   


50,582   


2,127   


4.21   

Obligations under capital lease


6,788   


466   


6.87   


5,221   


381   


7.30   

Junior subordinated debentures


92,786   


4,424   


4.77   


92,781   


5,714   


6.15   

Total borrowings


189,356   


6,485   


3.42   


202,020   


9,121   


4.51   

Total interest-bearing liabilities


2,678,633   


50,842   


1.90   


2,582,712   


74,973   


2.90   

Non-interest-bearing demand deposits


446,713   






422,388   





Other liabilities


98,339   






30,919   





Total non-interest-bearing liabilities


545,052   






453,307   





Total liabilities


3,223,685   






3,036,019   





Shareholders' equity


386,024   






364,393   





           Total liabilities and shareholders' equity


$ 3,609,709   






$ 3,400,412   


















Net interest income




$ 102,166   






$ 101,413   



Interest rate spread (5)






2.87%






2.83%

Net interest margin (6)






3.18%






3.30%

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






119.80%






119.14%


(1)  Average balances include non-accrual loans.

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

(3)  Interest earned on non-taxable investment securities is shown on a tax equivalent basis assuming a 35% marginal federal tax rate for all periods. The fully taxable equivalent adjustment for years ended December 31, 2009 and 2008 was $2.0 million and $1.8 million, respectively.

(4) Amounts include Advances from FHLBNY and Securities sold under agreements to repurchase - FHLBNY.

(5)  Interest rate spread represents the difference between the average yield on interest-earning assets and the average cost of interest-bearing liabilities.

(6)  Net interest margin represents net interest income as a percentage of average interest-earning assets.





SOURCE Sun Bancorp, Inc.



RELATED LINKS

http://www.sunnb.com