Sun Bancorp, Inc. Reports Fourth Quarter 2013 Results

            Sun Bancorp, Inc. Reports Fourth Quarter 2013 Results

PR Newswire

VINELAND, N.J., Jan. 22, 2014

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

Fourth Quarter Highlights

  oSignificant reduction in problem loans:

       oClassified Loans declined 41% from the prior quarter to $102.4
         million
       oNon-Performing Loans declined 31% to $38.0 million during the quarter
         and declined 60% or $57.6 million for the year

  oThe 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

  oSale 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

  oTier 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:

  oSignificant 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.

  oQuarterly 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.

  oProfessional fees totaled $4.9 million in the fourth quarter and $18.2
    million for 2013

  oNet 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

  oTotal 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.

  oCash 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.

  oInvestment 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.

  oGross 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

  oNet 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

  oNon-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

  oNon-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

  oDuring 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.

  oTotal 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

  oShareholders' 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.
               December      September                              December
                31,           30,           June 30,     March 31,   31,
For Three       2013          2013          2013         2013        2012
Months Ended:
Net interest    $  21,935     $  22,980     $  21,776    $  23,078   $ 23,981
income
Effect of tax      167           167           175          212        212
exempt income
Net interest
income, tax     $  22,102     $  23,147     $  21,951    $  23,290   $ 24,193
equivalent
basis
For the Year                                             December 31,
Ended:
                                                         2013        2012
Net interest                                             $  89,769     97,848
income
Effect of tax                                               720        870
exempt income
Net interest
income, tax                                              $  90,489     98,718
equivalent
basis
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      September     June 30,     March 31,   December
                31, 2013      30, 2013      2013         2013        31, 2012
Tangible book
value per
common share:
 
Shareholders'   $  245,134    $  257,139    $  261,664   $  264,339  $ 262,596
equity
  Less:
Intangible         38,993        39,448        39,988       40,529     41,450
assets
Tangible equity $  206,141    $  217,692    $  221,676   $  223,811  $ 221,147
 Common       88,711        88,618        88,572       88,403     88,301
stock
 Less:        1,997         2,068         2,107        2,107      2,107
Treasury stock
Total
outstanding        86,714        86,550        86,465       86,296     86,194
shares
Tangible book
value per       $  2.38       $  2.52       $  2.56      $  2.59     $ 2.57
common share:









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      $  21,935     $   23,981     $  89,769     $ 97,848
income
 Provision for        2,635          24,154        1,647        57,215
loan losses
 Non-interest         4,742          6,816         31,681       29,450
income
 Non-interest         32,457         31,597        129,949      120,608
expense
 Loss before          (8,415)        (24,954)      (10,146)     (50,525)
income taxes
 Income tax           -              -             -            (34)
benefit
 Net loss
available to          $  (8,415)    $   (24,954)   $  (10,146)   $ (50,491)
common
shareholders
Financial ratios:
 Return on
average                  (1.05)   %     (3.13)   %    (0.31)   %   (1.60)   %
assets^(1)
 Return on            (13.11)  %     (34.70)  %    (3.89)   %   (17.19)  %
average equity^(1)
 Return on
average tangible         (15.47)  %     (40.61)  %    (4.59)   %   (20.17)  %
equity^(1),(2)
 Net interest         2.99     %     3.30     %    3.05     %   3.43     %
margin^(1)
 Efficiency           121.67   %     102.60   %    107.00   %   94.21    %
ratio
 Loss per
common share:
 Basic         $  (0.10)     $   (0.29)     $  (0.12)     $ (0.59)
 Diluted      $  (0.10)     $   (0.29)     $  (0.12)     $ (0.59)
 Average equity       8.01     %     9.01     %    8.09     %   9.31     %
to average assets
                       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       2,101,754     2,230,287
allowance for loan
losses
 Loans                21,075        120,935
held-for-sale
 Investments          457,797       461,980
 Borrowings           68,765        70,992
 Junior
subordinated             92,786        92,786
debentures
 Shareholders'        245,134       262,595
equity
Credit quality and
capital ratios:
 Allowance for
loan losses to gross
loans held-for-          1.66      %   2.02       %

 investment
 Non-performing
loans
held-for-investment
to gross loans           1.78      %   3.64       %


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

                     1.87      %   4.29       %
held-for-investment,
loans held-for-sale
and real estate

 owned
 Allowance for
loan losses to
non-performing loans     93.52     %   55.33      %


held-for-investment
Total capital (to
risk-weighted
assets) ^ (3):
 Sun Bancorp,     14.40     %   13.72      %
Inc.
 Sun National     13.64     %   13.02      %
Bank
Tier 1 capital (to
risk-weighted
assets) ^ (3):
 Sun Bancorp,     12.34     %   11.82      %
Inc.
 Sun National     12.39     %   11.76      %
Bank
Leverage ratio:
 Sun Bancorp,     8.98      %   9.30       %
Inc.
 Sun National     9.01      %   9.24       %
Bank
 Book value per     $ 2.83        $ 3.05
common share
 Tangible book
value per common       $ 2.38        $ 2.57
share
(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,  December 31,

                                                   2013          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
                                                      440,097       443,182
 $439,488 at December 31, 2013 and December 31,
2012, respectively)
Investment securities held to maturity (estimated
fair value of $692 and $960 at
                                                      681           912
 December 31, 2013 and December 31, 2012,
respectively)
Loans receivable (net of allowance for loan losses
of $35,537 and $45,873 at
                                                      2,101,754     2,230,287
 December 31, 2013 and December 31, 2012,
respectively)
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 –      478           1,968
customers
Advances from the Federal Home Loan Bank of New       60,956        61,415
York (FHLBNY)
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         88,711        88,301
December 31, 2013; 88,300,637

 shares issued and 86,193,914 shares outstanding
at December 31, 2012
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
atDecember 31, 2013; and 2,106,723                   (24,562)      (26,162)

 shares at December 31, 2012
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     For the Year EndedDecember
                                                  31,
                         EndedDecember 31,
                         2013        2012         2013              2012
INTEREST INCOME
Interest and fees on  $  22,752    $ 25,670     $ 96,172        $   103,707
loans
Interest on taxable      2,219       1,860        6,668             9,138
investment securities
Interest on
non-taxable              310         390          1,338             1,618
investment securities
Dividends on
restricted equity        219         235          904               970
investments
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        444         460          1,776             1,438
borrowed
Interest on junior
subordinated             545         571          2,188             2,594
debentures
Total interest           3,565       4,174        15,313            17,585
expense
Net interest income      21,935      23,981       89,769            97,848
PROVISION FOR LOAN       2,635       24,154       1,647             57,215
LOSSES
Net interest income
(loss) after             19,300      (173)        88,122            40,633
provision for loan
losses
NON-INTEREST INCOME
Service charges on       2,263       2,486        9,056             10,954
deposit accounts
Mortgage banking         1,000       3,812        11,598            10,551
revenue, net
(Loss) gain on sale
of investment            -           (196)        3,489             234
securities
Investment products      599         606          2,684             2,296
income
BOLI income              466         488          1,882             1,986
Derivative credit        (710)       (1,750)      (1,588)           (2,275)
valuation adjustment
Other                    1,124       1,270        4,560             4,929
Total non-interest       4,742       6,716        31,681            28,675
income
NON-INTEREST EXPENSE
Salaries and employee    13,070      13,331       53,037            54,241
benefits
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          455         921          2,457             3,685
intangible assets
Data processing          1,223       1,138        4,244             4,384
expense
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        529         1,008        2,270             2,358
expense, net
Office supplies          245         298          857               1,247
expense
Other                    2,499       2,155        8,064             7,476
Total non-interest       32,457      31,497       129,949           119,833
expense
LOSS BEFORE INCOME       (8,415)     (24,954)     (10,146)          (50,525)
TAXES
INCOME TAX BENEFIT       -           -            -                 (34)
NET LOSS AVAILABLE TO $  (8,415)   $ (24,954)   $ (10,146)      $   (50,491)
COMMON SHAREHOLDERS
Basic loss per share  $  (0.10)    $ (0.29)     $ (0.12)        $   (0.59)
Diluted loss per      $  (0.10)    $ (0.29)     $ (0.12)        $   (0.59)
share
Weighted average      86,583,363   86,082,669   86,415,812      85,938,714
shares – basic
Weighted average      86,583,363   86,082,669   86,415,812      85,938,714
shares - diluted





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         $ 293,762     $ 453,583     $ 442,239     $ 311,660     $ 169,616
equivalents
Investment securities   457,797       425,029       361,149       335,844       461,980
Loans
held-for-investment:
 Commercial      1,587,566     1,636,856     1,676,133     1,737,079     1,725,567
and industrial
 Home equity    188,478       192,135       195,938       200,084       207,720
 Second          25,279        26,028        27,276        29,235        30,842
mortgage
 Residential     305,179       281,537       225,147       248,875       273,413
real estate
 Other          30,789        32,984        34,298        36,287        38,618
 Total
gross loans             2,137,291     2,169,540     2,158,792     2,251,560     2,276,160
held-for-investment
Allowance for loan      (35,537)      (48,854)      (48,007)      (47,124)      (45,873)
losses
 Net loans   2,101,754     2,120,686     2,110,785     2,204,436     2,230,287
held-for-investment
 Loans                21,075        18,707        69,417        41,469        120,935
held-for-sale
 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
                        478           554           562           2,726         1,968
 repurchase-
customers
 Advances from       60,956        60,997        61,037        61,077        61,415
FHLBNY
 Obligations under   7,331         7,402         7,472         7,541         7,609
capital lease
 Junior
subordinated            92,786        92,786        92,786        92,786        92,786
debentures
 Total               245,134       257,140       261,664       264,341       262,596
shareholders' equity
Quarterly average
balance sheet:
 Loans^(1):
 Commercial    $ 1,621,222   $ 1,671,302   $ 1,719,278   $ 1,744,553   $ 1,788,347
and industrial
 Home equity     190,394       194,622       197,237       204,311       210,085
 Second          26,142        27,041        28,679        30,347        32,442
mortgage
 Residential     312,977       299,667       307,248       330,916       319,427
real estate
 Other           26,134        27,723        28,929        30,410        32,444
 Total       2,176,869     2,220,355     2,281,371     2,340,537     2,382,745
gross loans
 Securities and
other                   782,200       763,575       680,659       607,284       545,781
interest-earning
assets
 Total
interest-earning        2,959,069     2,983,930     2,962,030     2,947,821     2,928,526
assets
 Total assets       3,205,900     3,264,884     3,222,106     3,206,536     3,193,607

Non-interest-bearing    585,530       549,684       531,210       506,600       511,813
demand deposits
 Total deposits     2,718,905     2,746,820     2,722,651     2,703,039     2,660,405
 Total
interest-bearing        2,295,072     2,358,923     2,355,086     2,360,883     2,318,794
liabilities
 Total               256,783       260,701       263,108       263,070       287,698
shareholders' equity
Capital and credit
quality measures:
Total capital (to
risk-weighted assets)
^ (2):
 Sun Bancorp,    14.40     %   14.72     %   14.80     %   14.21     %   13.72     %
Inc.
 Sun National    13.64     %   13.96     %   14.05     %   13.50     %   13.02     %
Bank
 Tier 1 capital
(to risk-weighted
assets) ^ (2):
 Sun Bancorp,    12.34     %   12.76     %   12.91     %   12.32     %   11.82     %
Inc.
 Sun National    12.39     %   12.70     %   12.79     %   12.25     %   11.76     %
Bank
 Leverage ratio:
 Sun Bancorp,    8.98      %   9.13      %   9.43      %   9.40      %   9.30      %
Inc.
 Sun National    9.01      %   9.09      %   9.33      %   9.33      %   9.24      %
Bank
 Average equity to   8.01      %   7.99      %   8.17      %   8.20      %   9.01      %
average assets
 Allowance for
loan losses to total
gross loans             1.66      %   2.25      %   2.22      %   2.09      %   2.02      %


held-for-investment
 Non-performing
loans
held-for-investment
to                      1.78      %   2.55      %   3.32      %   3.28      %   3.64      %

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


held-for-investment,    1.87      %   2.76      %   3.51      %   3.57      %   4.29      %
loans held-for-sale
and

 real estate
owned
 Allowance for
loan losses to
non-performing          93.52     %   88.19     %   66.93     %   63.87     %   55.33     %

 loans
held-for-investment
Other data:
Net (charge-offs)       (15,952)      123           2,766         1,080         (26,690)
recoveries
Non-performing
assets:
            $ 29,811      $ 44,979      $ 54,031      $ 57,143      $ 64,660
Non-accrual loans

Non-accrual loans       -             -             -             -             10,224
held-for-sale
Troubled
debt restructurings,    8,166         10,416        17,693        16,640        18,244
non-accrual
Troubled
debt restructurings,    -             -             -             -             2,499
held-for-sale
Loans past
due 90 days and         -             -             -             -             -
accruing
Real         2,503         5,059         6,743         8,472         7,473
estate owned, net
 Total $ 40,480        60,454        78,467      $ 82,255      $ 103,100
non-performing assets
(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       $  25,667    $  26,955    $  25,888    $  27,295    $ 28,367
income
Interest          3,565        3,808        3,937        4,005       4,174
expense
Tax-equivalent
net interest      22,102       23,147       21,951       23,290      24,193
income
Tax-equivalent    167          167          175          212         212
adjustment
Provision for     2,635        724          (1,883)      171         24,154
loan losses
Non-interest      4,742        5,799        10,211       10,882      6,716
income
Non-interest
expense
excluding
                  32,002       32,377       32,651       30,415      30,576
 amortization
of intangible
assets
Amortization
of intangible     455          540          541          921         921
assets
(Loss) income
before income     (8,415)      (4,862)      678          2,453       (24,954)
taxes
Net (loss)        (8,415)      (4,862)      678          2,453       (24,954)
income
Net (loss)
income
available to   $  (8,415)   $  (4,862)   $  678       $  2,453     $ (24,954)
common

 shareholders
Financial
ratios:
Return on
average assets    (1.05)  %    (0.60)  %    0.08    %    0.31    %   (3.13)   %
^(1)
Return on
average equity    (13.11) %    (7.46)  %    1.03    %    3.73    %   (34.70)  %
^(1)
Return on
average
tangible          (15.47) %    (8.80)  %    1.22    %    4.42    %   (40.61)  %
equity
^(1),(2)
Net interest      2.99    %    3.10    %    2.96    %    3.16    %   3.30     %
margin ^(1)
Efficiency        121.67  %    114.38  %    103.77  %    92.27   %   102.60   %
ratio
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  $  2.38      $  2.52      $  2.56      $  2.59      $ 2.57
value
Average basic  86,583,363   86,499,587   86,323,099   86,245,121   86,082,669
shares
Average        86,583,363   86,499,587   86,356,796   86,370,435   86,082,669
diluted shares
Non-interest
income:
Service
charges on     $  2,263     $  2,314     $  2,250     $  2,229     $ 2,486
deposit
accounts
Mortgage
banking           1,000        1,593        5,601        3,404       3,812
revenue, net
Net gain
(loss) on sale
of investment     -            2            (47)         3,487       (196)

 securities
Investment
products          599          678          728          679         606
income
BOLI income       466          482          486          448         488
Derivative
credit            (710)        (380)        6            (504)       (1,750)
valuation
adjustment
Other income      1,124        1,110        1,187        1,139       1,270
 Total
non-interest   $  4,742     $  5,799     $  10,211    $  10,882    $ 6,716
income
Non-interest
expense:
Salaries and
employee       $  13,070    $  12,656    $  13,019    $  14,292    $ 13,331
benefits
 Commission    1,098        2,001        2,556        2,041       2,514
expense
 Occupancy     3,406        3,456        3,081        3,576       3,416
expense
 Equipment     1,871        1,796        1,830        1,859       2,005
expense

Amortization      455          540          541          921         921
of intangible
assets
 Data
processing        1,223        995          1,027        999         1,138
expense

Professional      4,891        5,947        4,761        2,647       1,389
fees
 Insurance     1,498        1,496        1,542        1,430       1,506
expense

Advertising       903          676          698          553         1,040
expense
 Problem       769          816          1,023        799         776
loan costs
 Real
estate owned      529          252          1,255        234         1,008
expense, net
 Office
supplies          245          192          191          229         298
expense
 Other         2,499        2,094        1,668        1,756       2,155
expense
Total
non-interest   $  32,457    $  32,917    $  33,192    $  31,336    $ 31,497
expense
(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       $ 1,621,222  $ 17,406     4.29   %   $ 1,788,347  $ 19,628   4.39   %
industrial
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       312,977      2,671      3.41         319,427      2,959    3.71
estate
Other                  26,134       456        6.98         32,444       559      6.89
Total loans            2,176,869    22,753     4.18         2,382,745    25,671   4.31
receivable
Investment             439,788      2,693      2.45         507,158      2,672    2.11
securities^(3)
Interest-earning       342,412      221        0.26         38,623       24       0.25
bank balances
Total
interest-earning       2,959,069    25,667     3.47         2,928,526    28,367   3.87
assets
Non-interest earning
assets:
 Cash and due from    66,662                               72,129
banks
 Bank properties      49,300                               51,515
and equipment, net
 Goodwill and
intangible assets,     39,190                               41,902
net
 Other assets         91,679                               99,535
Total
non-interest-earning   246,831                              265,081
assets
Total assets         $ 3,205,900                          $ 3,193,607
Interest-bearing
liabilities:
Interest-bearing
deposit accounts:
Interest-bearing     $ 1,223,184  $ 960        0.31   %   $ 1,224,254  $ 1,178    0.38   %
demand deposits
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                2,133,375    2,575      0.48         2,148,592    3,143    0.59

 accounts
Short-term
borrowings:
Fed Funds Purchased    54           -          -            -            -        -
Securities sold
under agreements to
                       512          -          -            3,250        1        0.12
 repurchase-
customers
Long-term
borrowings:
FHLBNY advances ^(4)   60,981       320        2.10         66,527       331      1.99
Obligations under      7,364        124        6.74         7,639        127      6.65
capital lease
Junior subordinated    92,786       545        2.35         92,786       571      2.46
debentures
Total borrowings       161,697      989        2.45         170,202      1,030    2.42
Total
interest-bearing       2,295,072    3,565      0.62         2,318,794    4,173    0.72
liabilities
Non-interest bearing
liabilities:

Non-interest-bearing   585,530                              511,813
demand deposits
 Other liabilities    68,515                               75,302
Total non-interest     654,045                              587,115
bearing liabilities
Total liabilities      2,949,117                            2,905,909
Shareholders'          256,783                              287,698
equity
Total liabilities
and shareholders'    $ 3,205,900                          $ 3,193,607

 equity
Net interest income               $ 22,102                             $ 24,194
Interest rate spread                           2.85   %                           3.15   %
^(5)
Net interest margin                            2.99   %                           3.30   %
^(6)
Ratio of average
interest-earning
assets to
                                               128.93 %                           126.30 %
 average
interest-bearing
liabilities
(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       $ 1,688,702  $ 74,191    4.39   %  $ 1,814,626  $ 82,165    4.53   %
industrial
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       312,617      10,846    3.47        207,553      8,199     3.95
estate
Other                  28,285       1,961     6.93        35,636       2,477     6.95
Total loans            2,254,239    96,172    4.27        2,311,054    103,707   4.49
receivable
Investment             413,861      8,884     2.15        537,710      12,529    2.33
securities ^(3)
Interest-earning       295,199      746       0.25        28,646       68        0.24
bank balances
Total
interest-earning       2,963,299    105,802   3.57        2,877,410    116,304   4.04
assets
Non-interest earning
assets:
 Cash and due from    70,673                             73,000
banks
 Bank properties      49,357                             52,781
and equipment, net
 Goodwill and
intangible assets,     40,031                             43,280
net
 Other assets         101,593                            108,299
Total
non-interest-earning   261,654                            277,360
assets
Total assets         $ 3,224,953                        $ 3,154,770
Interest-bearing
liabilities:
Interest-bearing
deposit accounts:
Interest-bearing     $ 1,243,074  $ 4,228     0.34   %  $ 1,225,609  $ 4,778     0.39   %
demand deposits
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                2,179,472    11,349    0.52        2,132,738    13,554    0.64

 accounts
Short-term
borrowings:
Federal funds          14           -         -           5,437        20        0.37
purchased
Securities sold
under agreements to
                       1,565        2         0.13        5,157        7         0.14
 repurchase-
customers
Long-term
borrowings:
FHLBNY advances ^(4)   61,050       1,275     2.09        37,038       898       2.42
Obligations under      7,468        499       6.68        7,737        513       6.63
capital lease
Junior subordinated    92,786       2,188     2.36        92,786       2,594     2.80
debentures
Total borrowings       162,883      3,964     2.43        148,155      4,032     2.72
Total
interest-bearing       2,342,355    15,313    0.65        2,280,893    17,586    0.77
liabilities
Non-interest bearing
liabilities:

Non-interest-bearing   543,490                            499,435
demand deposits
 Other liabilities    78,209                             80,777
Total non-interest     621,699                            580,212
bearing liabilities
Total liabilities      2,964,054                          2,861,105
Shareholders'          260,899                            293,665
equity
Total liabilities
and shareholders'    $ 3,224,953                        $ 3,154,770

 equity
Net interest income               $ 90,489                           $ 98,718
Interest rate spread                          2.92   %                           3.27   %
^(5)
Net interest margin                           3.05   %                           3.43   %
^(6)
Ratio of average
interest-earning
assets to
                                              126.51 %                           126.15 %
 average
interest-bearing
liabilities
(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       $ 1,621,222  $ 17,406   4.29   %  $ 1,671,302  $ 19,205   4.60   %
industrial
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       312,977      2,671    3.41        299,667      2,620    3.50
estate
Other                  26,134       456      6.98        27,723       475      6.85
Total loans            2,176,869    22,753   4.18        2,220,355    24,576   4.43
receivable
Investment             439,788      2,693    2.45        414,189      2,157    2.08
securities^(3)
Interest-earning       342,412      221      0.26        349,386      222      0.25
bank balances
Total
interest-earning       2,959,069    25,667   3.47        2,983,930    26,955   3.61
assets
Non-interest earning
assets:
 Cash and due from    66,662                            72,336
banks
 Bank properties      49,300                            48,590
and equipment, net
 Goodwill and
intangible assets,     39,190                            39,717
net
 Other assets         91,679                            120,311
Total
non-interest-earning   246,831                           280,954
assets
Total assets         $ 3,205,900                       $ 3,264,884
Interest-bearing
liabilities:
Interest-bearing
deposit accounts:
Interest-bearing     $ 1,223,184  $ 960      0.31   %  $ 1,263,160  $ 1,064    0.34   %
demand deposits
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                2,133,375    2,575    0.48        2,197,136    2,813    0.51

 accounts
Short-term
borrowings:
Federal funds          54           -        -           -            -        -
purchased
Securities sold
under agreements to
                       512          -        -           555          -        -
 repurchase-
customers
Long-term
borrowings:
FHLBNY advances ^(4)   60,981       320      2.10        61,011       321      2.10
Obligations under      7,364        124      6.74        7,435        124      6.67
capital lease
Junior subordinated    92,786       545      2.35        92,786       550      2.37
debentures
Total borrowings       161,697      989      2.45        161,787      995      2.46
Total
interest-bearing       2,295,072    3,565    0.62        2,358,923    3,808    0.65
liabilities
Non-interest bearing
liabilities:

Non-interest-bearing   585,530                           549,684
demand deposits
 Other liabilities    68,515                            95,576
Total non-interest     654,045                           645,260
bearing liabilities
Total liabilities      2,949,117                         3,004,183
Shareholders'          256,783                           260,701
equity
Total liabilities
and shareholders'    $ 3,205,900                       $ 3,264,884

 equity
Net interest income               $ 22,102                          $ 23,147
Interest rate spread                         2.85   %                          2.96   %
^(5)
Net interest margin                          2.99   %                          3.10   %
^(6)
Ratio of average
interest-earning
assets to
                                             128.93 %                          126.50 %
 average
interest-bearing
liabilities
(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.

Website: http://www.sunnb.com
Contact: Sidney R. Brown, Chairman of the Board (856) 690-4329; Thomas R.
Brugger, Executive Vice President and Chief Financial Officer (856) 690-4233
 
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