EX-99 2 exhibit99.htm EXHIBIT 99 - PRESS RELEASE exhibit99.htm
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News Release
For Immediate Release
 
Contact:  Sidney R. Brown, Chairman of the Board (856) 690-4329
 Thomas R. Brugger, Executive Vice President and Chief Financial Officer (856) 690-4233
 
Sun Bancorp, Inc. Reports Fourth Quarter 2013 Results
 
Fourth Quarter Highlights
 
·  
Significant reduction in problem loans:
o  
Classified Loans declined 41% from the prior quarter to $102.4 million
o  
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%
 
 
VINELAND, NJ – January 22, 2014 – 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.
 
 
 
 
-3-

 
 
 
 
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.  
  
 
 
-4-

 
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

 

 
-5-

 


 
 
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.
 
 
 
-6-

 
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
 

 
-7-

 

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
 

 
-8-

 

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.
 

 
-9-

 

 
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.
 
 
 
-10-

 
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: