Sun Bancorp, Inc. Announces 2Q 2014 Earnings; One-time Charges for Comprehensive Restructuring Costs; Further Risk Reduction an

      Sun Bancorp, Inc. Announces 2Q 2014 Earnings; One-time Charges for     Comprehensive Restructuring Costs; Further Risk Reduction and Capital                                  Improvement  PR Newswire  MOUNT LAUREL, N.J., July 31, 2014  MOUNT LAUREL, N.J., July 31, 2014 /PRNewswire/ --  Second Quarter Highlights    oAnnounced comprehensive strategic restructuring to improve financial     performance, reduce costs, risk and operating complexity.   oOne-time charges of approximately $20 million related to restructuring     initiatives.   o$71.1 million of problem commercial loans sold and $24.4 million of     problem consumer loans moved to held-for-sale at lower of cost or market.   oSale of problem loans results in non-performing loans ("NPLs")     held-for-investment declining by 62% to $14.1 million; NPLs     held-for-investment to total loans held-for-investment fell from 1.8% to     0.8%. Classified assets fell from $105.6 million to $38.2 million, a     reduction of 64%.   oNegotiated and announced the proposed sale of seven Cape May County area     branch offices and the consolidation of four more locations; $28.5 million     of loans and $160.8 million of deposits were transferred to held-for-sale.     Upon settlement after all accounts are identified for sale, the     transaction is anticipated to include approximately $65 million of loans     and $180 million of deposits.  Sun Bancorp, Inc. (NASDAQ: SNBC) (the "Company") reported today a net loss available to common shareholders of $24.2 million, or a loss of $0.28 per diluted share, for the quarter ended June 30, 2014, compared to a net loss of $1.9 million, or a loss of $0.02 per diluted share, and net income of $678 thousand, or $0.01 per diluted share, for the first quarter of 2014 and the second quarter of 2013, respectively. The following are key items and events that occurred during the second quarter of 2014:    oSale of $71.1 million of criticized commercial loans to third-party     investors resulting in a net loss of $13.0 million inclusive of swap     termination costs and transaction costs.   oProvision for loan losses of $14.8 million was recorded in the second     quarter of 2014, primarily due to the commercial loan sales, compared to     no provision expense in the first quarter of 2014. The allowance for loan     losses equaled $28.4 million at June 30, 2014, a decrease of $5.4 million     and $7.1 million from March 31, 2014 and December 31, 2013, respectively.     The allowance for loan losses equaled 1.53% of gross loans     held-for-investment and 202.04% of non-performing loans     held-for-investment at June 30, 2014 as compared to 1.62% and 90.18%,     respectively, at March 31, 2014 and 1.66% and 93.6%, respectively, at     December 31, 2013.   oNon-performing and higher risk consumer loans totaling $24.4 million were     transferred to held-for-sale at lower of cost or market, requiring     charge-offs of $4.6 million. The remaining balance of $19.8 million     includes $4.0 million of non-performing loans.   oNet interest margin was 3.03% in the second quarter of 2014 compared to     3.07% in the first quarter of 2014 and 2.96% in the second quarter of     2013.  On June 30, 2014, the Board of Directors of the Company and Sun National Bank (the "Bank") approved a comprehensive restructuring plan, which includes, among other things, the Bank exiting Sun Home Loans, its retail consumer mortgage banking origination business, and exiting its healthcare and asset-based lending businesses; the proposed sale of seven branch offices in the Cape May County area; significant classified asset and operating expense reductions and declaration of a 1-for-5 reverse stock split. The Company also announced the consolidation of four additional branch offices, which are expected to be completed by the fourth quarter of 2014.  Below is a summary of significant balance sheet activity that either occurred or was authorized by the Company during the second quarter of 2014:  Description             Amount*   Status* Problem commercial      $71      Sales completed in June 2014 loans Manufactured housing    $20      Moved to held for sale; closing expected in loans                            second half of 2014 Home equity loans       $4       Moved to held for sale; closing expected in                                  second half of 2014                                  Moved to held for sale; Loans ($29), Net Branch assets           $34      fixed                                  assets ($4), Cash ($1). Closing expected in                                  Q1'2015 Branch deposits         $161     Moved to held-for-sale; closing expected in                                  Q1'2015 Jumbo residential loans $47      Sales completed in Q2'2014  * Dollars in millions  Below is a summary of significant one-time charges during the second quarter of 2014:  Description                 Amount*  Description*                                      Provision ($11), swap terminations ($1) Commercial loan sale losses $13      and                                      transaction fees ($1) Consumer loan losses upon            Moved to held for sale at lower of cost transfer                    $3       or market; to held-for-sale                     Charge-offs net of existing reserves.                                      Restructuring and closure of non-core Severance and benefits      $3       business                                      units** Fixed asset disposals       $0.4     Mortgage operations and branch                                      consolidation Lease exit costs            $0.3     Mortgage operations facilities  * Dollars in millions  ** The payment of severance and other related benefits is subject to prior regulatory approval.  "On July 3rd, 2014, we announced a series of decisive remedial and restructuring initiatives designed to address the Company's long standing obstacles to earnings, regulatory compliance and overall performance excellence," said President and CEO Thomas M. O'Brien. "We are forcefully confronting the legacy challenges here with a strong sense of urgency. The recently announced initiatives, while unfortunately difficult for many stakeholders, have established the foundation needed to bring our efficiency, credit and risk metrics more closely in line with those of our peers. We are now embarking on the execution of these plans in an effort to achieve goals that are so important to our long-term success. Notwithstanding the costs of the restructuring initiatives, all of our capital ratios and liquidity positions remain strong. While there is a lot of work to do in the execution of the plan, members of management and the Board are keenly focused on its successful implementation."  Discussion of Results:  Balance Sheet  The Bank has been reducing the size of its balance sheet over the past few quarters as it focuses internally on risk reduction and capital ratio improvement. During the quarter, total assets fell $143.8 million due primarily to the commercial problem loan sales of $71.1 million and continued runoff in the commercial loan portfolio. Total assets were $2.89 billion at June 30, 2014, as compared to $3.04 billion at March 31, 2014 and $3.09 billion at December 31, 2013.  The Bank continues to maintain a high level of liquidity, which enabled it to reduce the size of its balance sheet during the quarter. Even with the reduction in total assets, cash and cash equivalents rose to $330.4 million at June 30, 2014, as compared to $282.1 million at March 31, 2014 and $267.8 million at December 31, 2013. The increase of $48.3 million in the second quarter of 2014 as compared to the prior quarter was primarily due to the aforementioned commercial loan sales and commercial loan pay-downs, partially offset by a decrease in deposits as public funds balances declined.  Gross loans held-for-investment totaled $1.86 billion at June 30, 2014, as compared to $2.08 billion at March 31, 2014 and $2.14 billion at December 31, 2013. The significant decline is due to the aforementioned commercial loan sales, the sale of $46 million of portfolio jumbo residential mortgage loans, the transfer of consumer loans to held-for-sale and commercial loan pay-downs. The Bank is proactively engaging with its commercial borrowers to build on its existing relationships with top borrowers in industry segments where we believe we can excel. As the Bank builds deeper relationships with its best borrowers, acceptable runoff is occurring in segments where we choose not to compete or lower our credit standards. This runoff is expected to continue over the next few quarters.  Given the high level of liquidity throughout 2013 and 2014, the Bank has intensified its efforts to return to profitability and build its deposit portfolio mix. The Bank re-priced interest rates on certain deposit accounts in order to more accurately reflect the current sustained low level of interest rates. The Bank also experienced planned maturity run-off in brokered CDs and other jumbo CDs. These efforts caused some attrition in deposit balances in the past few quarters but the overall mix and profitability has substantially improved. Deposits were $2.27 billion at June 30, 2014, as compared to $2.57 billion at March 31, 2014 and $2.62 billion at December 31, 2013. In addition to reclassifying $160.8 million of deposits to held-for-sale for the planned branch sale, the Bank has experienced a decline in public funds deposit balances. The total quarterly cost of deposits fell by three basis points to 0.35% in the past two quarters and the non-interest demand deposit account ("DDA") mix has risen from 21.4% to 23.7%.  Net Interest Income and Margin  Net interest income decreased $780 thousand from the linked quarter to $20.6 million for the three months ended June 30, 2014. The net interest margin decreased four basis points to 3.03% for the three months ended June 30, 2014, from 3.07% for the linked quarter. As compared to the linked quarter, the average yield on loans was flat at 4.11%, while total interest-earning assets decreased five basis points to 3.49% for the three months ended June 30, 2014. The decrease from the linked quarter is due primarily to an increase in the mix of interest earning cash balances as well as a five basis point decline in yields on investment securities.  Non-Interest Income  Non-interest income was $4.0 million for the quarter ended June 30, 2014, as compared to $4.9 million for the quarter ended March 31, 2014. The decrease from the linked quarter of $971 thousand was primarily attributable to a $1.1 million increase in the negative derivative credit valuation adjustments from the prior quarter. This change was primarily due to swap termination fees of $1.4 million recorded in the second quarter of 2014, associated with the commercial loan sales.  Service charges on deposit accounts and investment products income bounced back in the second quarter after seasonal and weather-related weakness in these categories in the first quarter. These fees rose to $2.9 million in the quarter, which is an increase of 5.8% sequentially. Net mortgage banking revenue fell $106 thousand to $529 thousand for the quarter ended June 30, 2014, as originations and closings remained weak. This revenue will be eliminated over time as the Company is closing its mortgage banking operations.  Non-Interest Expense  Non-interest expense was $33.7 million in the second quarter of 2014, an increase of $5.8 million compared to the linked quarter. Restructuring-related expenses in the quarter were $3.3 million, including $2.7 million of severance and benefit costs, $380 thousand of fixed asset disposal costs and $285 thousand of lease exit costs. In comparison to the linked quarter, increases in salaries and employee benefits, equipment expense, professional fees, other real estate owned, and other expense of $3.1 million, $607 thousand, $867 thousand, $558 thousand, and $1.6 million, respectively, were partially offset by a decrease of $714 thousand in occupancy expense. Salaries and employee benefits increased primarily as a result of the accrual of severance and benefit costs associated with the Company's restructuring noted above. Other expense increased $1.6 million due to loan sale-related transaction costs. Occupancy expense decreased during the quarter ended June 30, 2014 after elevated spending in the first quarter due to unusual winter weather related costs, which was partially offset by restructuring-related lease termination costs.  Asset Quality  Asset quality improved significantly during the quarter due to the sale of $71.1 million of problem commercial loans, the movement of $24.4million of problem consumer loans to held-for-sale at lower of cost or market and continued workout success. Total non-performing assets fell 52% and were $19.5 million, or 0.67% of total assets, at June 30, 2014, as compared to $40.2 million, or 1.32% of total assets, at March 31, 2014 and $40.5 million, or 1.31% of total assets, at December 31, 2013. Non-performing loans held-for-investment decreased $23.4 million to $14.1 million at June 30, 2014, from $37.4 million at March 31, 2014, due primarily to the aforementioned problem loan sales.  During the second quarter of 2014, there was $14.8 million of provision expense recorded, as compared to no provision expense in the linked quarter. The allowance for loan losses was $28.4 million, or 1.53% of gross loans held-for-investment, at June 30, 2014, as compared to $33.8 million, or 1.62% of gross loans held-for-investment, at March 31, 2014 and $35.5 million, or 1.66% of gross loans held-for-investment, at December 31, 2013. Net charge-offs were $20.2 million in the second quarter of 2014, as compared to net charge-offs in the linked quarter of $1.8 million and net recoveries of $2.8 million in the second quarter of 2013. Second quarter gross charge-offs related to loan sale activity totaled $19.0 million. "The level of non-accrual and classified loan relationships remained stubbornly high as we ended the first quarter. The result of these loan sales is better clarity surrounding our credit risk profile," stated Mr. O'Brien. "From an asset quality perspective, we can now begin to function in a more traditional operating environment."  Capital  Shareholders' equity totaled $227.7 million at June 30, 2014, compared to $248.9 million at March 31, 2014 and $245.3 million at December 31, 2013.At June 30, 2014, the Bank's total risk-based capital ratio, Tier 1 capital ratio and leverage capital ratio were approximately 14.5%, 13.2%, and 9.1%, respectively. The Company's tangible equity to tangible assets ratio was 6.6% at June 30, 2014, as compared to 7.0% at March 31, 2014 and 6.8% at December 31, 2013. At June 30, 2014, the Company's total risk-based capital ratio, Tier 1 capital ratio and leverage capital ratio were approximately 15.0%, 12.4%, and 8.6%, respectively.  The Company will hold its regularly scheduled conference call on Thursday, July 31, 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 on the Company's website for two weeks following the call.  About Sun Bancorp  Sun Bancorp, Inc. (NASDAQ: SNBC) is a $2.89 billion asset bank holding company headquartered in Mount Laurel, New Jersey. Its primary subsidiary is Sun National Bank, a full service commercial bank serving customers throughout New Jersey. Sun National Bank is an Equal Housing Lender and its deposits are insured up to the legal maximum by the Federal Deposit Insurance Corporation (FDIC). For more information about Sun National Bank and Sun Bancorp, Inc., visit www.sunnationalbank.com.  Cautionary Note Regarding Forward-Looking Statements  The foregoing material contains forward-looking statements as defined in the Private Securities Litigation Reform Act of 1995, 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 the successful implementation of our comprehensive strategic restructuring plan to improve financial performance and capital, reduce costs, risk and operating complexity, and the timing of the completion of the transactions contemplated thereby, addressing the Company's long standing obstacles to earnings, regulatory compliance and overall performance excellence, having established the foundation needed to bring our efficiency, credit and risk metrics in line with those of our peers, building on our existing relationships with top borrowers, returning to profitability, building the Bank's deposit portfolio mix and reducing classified assets and expenses. Actual results and trends could differ materially from those set forth in such statements and there can be no assurances that our strategic restructuring plan will improve our financial performance, future capital levels, reduce our costs, reduce our risks or reduce our operating complexity; that our strategic restructuring plan will be completed as and in the time frames anticipated; that we will adequately address long standing obstacles to earnings, regulatory compliance and overall performance excellence; that we will build the foundation necessary to bring our efficiency, credit and risk metrics in line with those of our peers; that we will build on existing relationships with top borrowers and buildthe Bank's deposit portfolio mix; or that we will return to profitability or further reduce classified assets or expenses. We caution that such statements are subject to a number of uncertainties. Factors that could cause actual results to differ from those expressed or implied by such forward-looking statements include, but are not limited to: (i) competition among providers of financial services; (ii) changes in laws and regulations, including without limitation changes in capital requirements under the federal prompt corrective action regulations; (iii) changes inbusiness strategy or an inability to executestrategy due to the occurrence of unanticipated events; (iv) the failureto complete any or all of the transactions contemplated in the Company's comprehensive strategic restructuring plan on the terms currently contemplated; (v) local, regional and national economic conditions and events and the impact they may have on the Company, the Bank and its customers; (vi) the ability to attract deposits and other sources of liquidity; (vii) changes in the financial performance and/or condition of Bank's borrowers; (viii) changes in the level of non-performing and classified assets and charge-offs; (ix) changes in estimates of future loan loss reserve requirements based upon the periodic review thereof under relevant regulatory and accounting requirements; (x) inflation, interest rate, securities market and monetary fluctuations; (xi) changes in consumer spending, borrowing and saving habits; (xii) the ability to increase market share and control expenses; (xiii) volatility in the credit and equity markets and its effect on the general economy;(xiv) the effect of changes in accounting policies and practices, as may be adopted by the regulatory agencies, as well as the Public Company Accounting Oversight Board, the Financial Accounting Standards Board and other accounting standard setters; and (xv) 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, 2013, the Company's Form 10-Q for the three months ended March 31, 2014, 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 June 30, 2014, March 31, 2014, December 31, 2013, September 30, 2013, and June 30, 2013, were $166 thousand, $166 thousand, $167 thousand, $167 thousand, and $175 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, shareholders' equity less intangible assets, to outstanding common shares. Intangible assets at June 30, 2014, March 31, 2014, December 31, 2013, September 30, 2013, and June 30, 2013, were $38.4 million, $38.7 million, $39.0 million, $39.4 million, and $40.0 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 June 30, 2014, March 31, 2014, December 31, 2013, September 30, 2013, and June 30, 2013.                             June 30,  March 31,  December  September  June 30,                             2014      2014       31, 2013  30, 2013   2013 For Three Months Ended: Net interest income         $ 20,612  $  21,392  $ 21,935  $  22,980  $ 21,776 Effect of tax exempt          166        166       167        167       175 income Net interest income, tax    $ 20,778  $  21,558  $ 22,102  $  23,147  $ 21,951 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 June 30, 2014, March 31, 2014, December, 31, 2013, September 30, 2013, and June 30, 2013.                           June 30,   March 31,  December   September  June 30,                          2014       2014       31, 2013   30, 2013   2013 Tangible book value per common share:  Shareholders' equity  $ 227,656  $ 248,898  $ 245,337  $ 257,140  $ 261,664 Less: Intangible         38,426     38,709     38,993     39,448     39,988 assets Tangible equity          $ 189,230  $ 210,189  $ 206,344  $ 217,692  $ 221,676 Common stock             88,762     88,709     88,711     88,618     88,572 Less: Treasury stock     1,596      1,943      1,997      2,068      2,107 Total outstanding shares   87,166     86,766     86,714     86,550     86,465 Tangible book value per  $ 2.17     $ 2.42     $ 2.38     $ 2.52     $ 2.56 common share:    SUN BANCORP, INC. AND SUBSIDIARIES FINANCIAL HIGHLIGHTS (Unaudited) (Dollars in thousands, except per share amounts)                       For the Three Months          For the Six Months Ended                       Ended                       June 30,                      June 30,                         2014          2013          2014           2013 Profitability for the period:  Net interest        $  20,612     $   21,776    $  42,004      $ 44,854 income  Provision for          14,803         (1,883)      14,803        (1,712) loan losses  Non-interest           3,977          10,258       8,926         21,140 income  Non-interest           33,677         33,239       61,565        64,575 expense (Loss) income           (23,891)       678          (25,438)      3,131 before income taxes  Net (loss) income available to common     $  (24,248)   $   678       $  (26,154)    $ 3,131 shareholders Financial ratios:  Return on average      (3.25)   %     0.08    %    (1.73)    %   0.19    % assets^(1)  Return on average      (38.17)  %     1.03    %    (20.71)   %   2.38    % equity^(1)  Return on average tangible                   (45.00)  %     1.22    %    (24.46)   %   2.81    % equity^(1),(2)  Net interest           3.03     %     2.96    %    3.05      %   3.05    % margin^(1)  Efficiency ratio       136.96   %     103.76  %    120.88    %   97.85   %  (Loss) earnings per common share:  Basic           $  (0.28)     $   0.01      $  (0.30)      $ 0.04  Diluted        $  (0.28)     $   0.01      $  (0.30)      $ 0.04  Average equity to      8.52     %     8.17    %    8.37      %   8.18    % average assets                          June 30,                    December 31,                          2014        2013           2013 At period-end:  Total assets         $ 2,894,658   $ 3,205,921  $       3,087,553  Total deposits         2,272,765     2,722,038          2,621,571  Loans receivable, net of allowance for       1,827,724     2,110,785          2,102,167 loan losses  Loans held-for-sale, at fair     9,410         69,417             20,662 value  Loans held-for-sale, at          19,761        -                  - lower of cost or market  Investments            454,051       361,149            457,797  Deposits               160,769       -                  - held-for-sale  Borrowings             68,734        69,071             68,765  Junior subordinated               92,786        92,786             92,786 debentures  Shareholders'          227,656       261,664            245,337 equity Credit quality and capital ratios:  Allowance for loan losses to gross loans      1.53      %   2.22      %        1.66        % held-for- investment  Non-performing loans held-for-investment to gross loans                0.76      %   3.32      %        1.78        %   held-for-investment  Non-performing assets to gross loans held-for-                  1.02      %   3.51      %        1.87        % investment, loans held-for-sale and real estate owned  Allowance for loan losses to non-performing loans       202.04    %   66.93     %        93.57       % held- for-investment Total capital (to risk-weighted assets) ^ (3):  Sun Bancorp,       15.00     %   14.80     %        14.41       % Inc.  Sun National       14.45     %   14.05     %        13.65       % Bank Tier 1 capital (to risk-weighted assets) ^ (3):  Sun Bancorp,       12.43     %   12.91     %        12.34       % Inc.  Sun National       13.20     %   12.79     %        12.40       % Bank Leverage ratio:  Sun Bancorp,       8.59      %   9.43      %        8.99        % Inc.  Sun National       9.12      %   9.33      %        9.02        % Bank  Book value per       $ 2.61        $ 3.03         $     2.83 common share  Tangible book        $ 2.17        $ 2.56         $     2.38 value per common share (1) Amounts for the three and six 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) June 30, 2014 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)                                                     June 30,     December 31,                                                                  2013                                                     2014 ASSETS Cash and due from banks                             $ 49,384     $  38,075 Interest-earning bank balances                        281,056       229,687 Cash and cash equivalents                             330,440       267,762  Restricted cash                                    26,000        26,000 Investment securities available for sale (amortized cost of $437,559 and                                  437,027       440,097 $452,023 at June 30, 2014 and December 31, 2013, respectively) Investment securities held to maturity (estimated fair value of $645 and $692 at                        636           681  June 30, 2014 and December 31, 2013, respectively) Loans receivable (net of allowance for loan losses of $28,392 and $35,537 at                             1,827,724     2,102,167 June 30, 2014 and December 31, 2013, respectively) Loans held-for-sale, at fair value                    9,410         20,662 Loans held-for-sale, at lower of cost or market       19,761        - Branch assets held-for-sale                           34,058        - Restricted equity investments, at cost                16,388        17,019 Bank properties and equipment, net                    42,359        49,095 Real estate owned                                     1,327         2,503 Accrued interest receivable                           6,276         7,112 Goodwill                                              38,188        38,188 Intangible assets, net                                238           805 Deferred taxes, net                                   -             4,575 Bank owned life insurance (BOLI)                      78,166        77,236 Other assets                                          26,660        33,651 Total assets                                        $ 2,894,658  $  3,087,553 LIABILITIES AND SHAREHOLDERS' EQUITY Liabilities: Deposits                                            $ 2,272,765  $  2,621,571 Branch deposits held-for-sale                         160,769       - Securities sold under agreements to repurchase –      670           478 customers Advances from the Federal Home Loan Bank of New       60,873        60,956 York (FHLBNY) Obligations under capital lease                       7,191         7,331 Junior subordinated debentures                        92,786        92,786 Deferred taxes, net                                   796           - Other liabilities                                     71,152        59,094 Total liabilities                                     2,667,002     2,842,216 Shareholders' equity: Preferred stock, $1 par value, 1,000,000 shares       -             - authorized; none issued Common stock, $1 par value, 200,000,000 shares authorized; 88,757,089 shares issued and 87,161,545 shares outstanding at June 30, 2014;                         88,757        88,711 88,711,035 shares issued and 86,714,414 shares outstanding at December 31, 2013 Additional paid-in capital                            502,104       506,719 Retained deficit                                      (344,108)     (317,954) Accumulated other comprehensive loss                  (315)         (7,055) Deferred compensation plan trust                      (599)         (522) Treasury stock at cost,1,595,544 shares atJune 30, 2014; and 1,996,621                               (18,183)      (24,562) shares at December 31, 2013 Total shareholders' equity                            227,656       245,337 Total liabilities and shareholders' equity          $ 2,894,658  $  3,087,553    SUN BANCORP, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF OPERATIONS (Unaudited) (Dollars in thousands, except per share amounts)                                For the Three Months      For the Six Months                                                          EndedJune 30,                                EndedJune 30,                                2014          2013        2014         2013 INTEREST INCOME Interest and fees on loans   $ 21,067     $  23,945    $ 42,916    $  48,844 Interest on taxable            2,193         1,225       4,443        2,769 investment securities Interest on non-taxable        308           324         617          718 investment securities Dividends on restricted        209           217         441          463 equity investments Total interest income          23,777        25,711      48,417       52,794 INTEREST EXPENSE Interest on deposits           2,188         2,945       4,469        5,960 Interest on funds borrowed     443           444         879          887 Interest on junior             534           546         1,065        1,093 subordinated debentures Total interest expense         3,165         3,935       6,413        7,940 Net interest income            20,612        21,776      42,004       44,854 PROVISION FOR LOAN LOSSES      14,803        (1,883)     14,803       (1,712) Net Interest income after      5,809         23,659      27,201       46,566 provision for loan losses NON-INTEREST INCOME Service charges on deposit     2,215         2,250       4,366        4,479 accounts Mortgage banking revenue,      529           5,601       1,164        9,005 net Gain on sale of investment     50            -           50           3,487 securities  Investment products income   715           728         1,332        1,407 BOLI income                    469           486         930          934 Derivative credit valuation    (1,162)       6           (1,200)      (498) adjustment Other                          1,161         1,187       2,284        2,326 Total non-interest income      3,977         10,258      8,926        21,140 NON-INTEREST EXPENSE Salaries and employee          15,992        13,019      28,876       27,311 benefits Commission expense             811           2,556       1,708        4,597 Occupancy expense              3,552         3,081       7,818        6,657 Equipment expense              2,356         1,830       4,105        3,689 Amortization of intangible     283           541         567          1,462 assets Data processing expense        1,281         1,027       2,478        2,026 Professional fees              2,353         4,761       3,839        7,408 Insurance expenses             1,358         1,542       2,825        2,972 Advertising expense            523           698         1,109        1,251 Problem loan expense           566           1,023       1,198        1,822 Real estate owned expense,     702           1,255       846          1,489 net Office supplies expense        285           191         536          420 Other                          3,615         1,715       5,660        3,471 Total non-interest expense     33,677        33,239      61,565       64,575 (LOSS) INCOME BEFORE INCOME    (23,891)      678         (25,438)     3,131 TAXES INCOME TAX EXPENSE             357           -           716          - NET (LOSS) INCOME AVAILABLE TO COMMON                   $ (24,248)   $  678       $ (26,154)  $  3,131 SHAREHOLDERS Basic (loss) earnings per    $ (0.28)     $  0.01      $ (0.30)    $  0.04 share Diluted (loss) earnings per  $ (0.28)     $  0.01      $ (0.30)    $  0.04 share Weighted average shares –    87,089,147   86,323,099   86,915,959  86,284,325 basic Weighted average shares -    87,089,147   86,356,796   86,915,959  86,357,968 diluted    SUN BANCORP, INC. AND SUBSIDIARIES HISTORICAL TRENDS IN QUARTERLY FINANCIAL DATA(Unaudited) (Dollars in thousands)                              2014          2014          2013          2013          2013                              Q2            Q1            Q4            Q3            Q2 Balance sheet at quarter end: Cash and cash equivalents    $ 330,440     $ 282,095     $ 267,762     $ 427,583     $ 416,239 Restricted cash                26,000        26,000        26,000        26,000        26,000 Investment securities          454,051       456,724       457,797       425,029       361,149 Loans held-for-investment:  Commercial             1,363,900     1,519,993     1,587,566     1,636,856     1,676,133  Home equity           165,671       184,936       188,478       192,135       195,938  Second mortgage       21,282        23,312        25,279        26,028        27,276  Residential real       298,063       326,945       305,552       281,537       225,147 estate  Other                 7,200         28,894        30,829        32,984        34,298  Total gross        1,856,116     2,084,080     2,137,704     2,169,540     2,158,792 loans held-for-investment Allowance for loan losses     (28,392)      (33,768)      (35,537)      (48,854)      (48,007)  Net loans          1,827,724     2,050,312     2,102,167     2,120,686     2,110,785 held-for-investment                                                                                      Loans held-for-sale         29,171        16,048        20,662        18,707        69,417  Branch assets               34,058        -             -             -             - held-for-sale  Goodwill                  38,188        38,188        38,188        38,188        38,188  Intangible assets, net     238           521           805           1,260         1,800  Total assets              2,894,658     3,038,467     3,087,553     3,236,321     3,205,921  Total deposits             2,272,765     2,573,445     2,621,571     2,752,693     2,722,038  Branch deposits             160,769       -             -             -             - held-for-sale Securities sold under agreements to                  670           471           478           554           562 repurchase- customers  Advances from FHLBNY       60,873        60,915        60,956        60,997        61,037  Obligations under          7,191         7,259         7,331         7,402         7,472 capital lease  Junior subordinated        92,786        92,786        92,786        92,786        92,786 debentures  Total shareholders'        227,656       248,898       245,337       257,140       261,664 equity Quarterly average balance sheet:  Loans^(1):  Commercial           $ 1,480,491   $ 1,560,442   $ 1,621,222   $ 1,671,302   $ 1,719,278  Home equity            185,710       187,052       190,394       194,622       197,237  Second mortgage       24,358        24,863        26,142        27,041        28,679  Residential real       338,028       331,433       312,977       299,667       307,248 estate  Other                  23,196        25,014        26,134        27,723        28,929  Total gross        2,051,783     2,128,804     2,176,869     2,220,355     2,281,371 loans  Securities and other       694,529       677,850       782,200       763,575       680,659 interest-earning assets  Total interest-earning     2,746,312     2,806,654     2,959,069     2,983,930     2,962,030 assets  Total assets              2,982,427     3,049,321     3,205,900     3,264,884     3,222,053  Non-interest-bearing       573,290       559,606       585,530       549,684       531,210 demand deposits  Total deposits            2,519,901     2,584,588     2,718,905     2,746,820     2,722,646  Total interest-bearing     2,108,103     2,186,394     2,295,072     2,358,923     2,355,081 liabilities  Total shareholders'        254,116       250,946       256,783       260,701       263,108 equity Capital and credit quality measures: Total capital (to risk-weighted assets) ^ (2):  Sun Bancorp, Inc.      15.00     %   14.87     %   14.41     %   14.72     %   14.80     %  Sun National Bank      14.45     %   14.08     %   13.65     %   13.96     %   14.05     %  Tier 1 capital (to risk-weighted assets) ^ (2):  Sun Bancorp, Inc.      12.43     %   12.75     %   12.34     %   12.76     %   12.91     %  Sun National Bank      13.20     %   12.83     %   12.40     %   12.70     %   12.79     %  Leverage ratio:  Sun Bancorp, Inc.      8.59      %   9.40      %   8.99      %   9.13      %   9.43      %  Sun National Bank      9.12      %   9.45      %   9.02      %   9.09      %   9.33      %  Average equity to          8.52      %   8.23      %   8.01      %   7.99      %   8.17      % average assets  Allowance for loan                                                                 losses to total gross loans    1.53      %   1.62      %   1.66      %             %             % held-for-investment                                             2.25          2.22  Non-performing loans held-for-investment to         0.76      %   1.80      %   1.78      %   2.55      %   3.32      % gross loans held-for-investment  Non-performing assets to gross loans held- for-investment,        1.02      %   1.91      %   1.87      %   2.76      %   3.51      % loans held-for-sale and real estate owned  Allowance for loan                                                                     losses to non-performing       202.04    % loans                                90.18     %   93.57     %   88.19     %   66.93     % held-for-investment Other data: Net (charge-offs) recoveries   (20,179)      (1,768)       (15,452)      123           2,766 Non-performing assets:  Non-accrual loans $ 13,470      $ 29,387      $ 29,811      $ 44,976      $ 54,031  Non-accrual loans       4,086         -             -             -             - held-for-sale Troubled debt       583           8,017         8,166         10,419        17,693 restructurings, non-accrual Loans past due 90   -             42            -             -             - days and accruing Real estate         1,327         2,728         2,503         5,059         6,743 owned, net  Total        $ 19,466      $ 40,174        40,480        60,454      $ 78,467 non-performing assets (1) Average balances include non-accrual loans and loans held-for-sale.  (2) June 30, 2014 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)                    2014            2014                   2013                   2013              2013                    Q2              Q1                     Q4                     Q3                Q2 Profitability for the quarter: Tax-equivalent     $  23,943       $  24,806              $ 25,667               $ 26,955          $ 25,888 interest income Interest expense      3,165           3,248                 3,565                  3,808             3,937 Tax-equivalent net    20,778          21,558                22,102                 23,147            21,951 interest income Tax-equivalent        166             166                   167                    167               175 adjustment Provision for loan    14,803          -                     2,135                  724               (1,883) losses Non-interest          3,977           4,949                 4,742                  5,799             10,211 income Non-interest expense excluding amortization    33,394          27,604                32,002                 32,377            32,651 of intangible assets Amortization of       283             284                   455                    540               541 intangible assets (Loss) income before income         (23,891)        (1,547)               (7,915)                (4,862)           678 taxes Income tax expense    357             359                   297                    -                 - Net (loss) income                                                                  available to                                                                                          common            $  (24,248)     $  (1,906)             $                     $                $ shareholders                                                                                         678                                                             (8,212)                (4,862) Financial ratios: Return on average     (3.25)     %    (0.25)           %    (1.02)             %   (0.60)        %   0.08          % assets ^(1) Return on average     (38.17)    %    (3.04)           %    (12.79)            %   (7.46)        %   1.03          % equity ^(1) Return on average tangible equity       (45.00)    %    (3.59)           %    (15.10)            %   (8.80)        %   1.22          % ^(1),(2) Net interest          3.03       %    3.07             %    2.99               %   3.10          %   2.96          % margin ^(1) Efficiency ratio      136.96     %    105.87           %    121.67             %   114.38        %   103.77        % Per share data: (Loss) income per common share: Basic              $  (0.28)       $  (0.02)              $ (0.09)               $ (0.06)          $ 0.01 Diluted            $  (0.28)       $  (0.02)              $ (0.09)               $ (0.06)          $ 0.01 Book value         $  2.61         $  2.87                $ 2.83                 $ 2.97            $ 3.03 Tangible book      $  2.17         $  2.42                $ 2.38                 $ 2.52            $ 2.56 value Average basic         87,089,147            86,740,847              86,583,363        86,499,587        86,323,099 shares Average diluted       87,089,147            86,740,847              86,583,363        86,499,587        86,356,796 shares Non-interest income: Service charges on $  2,215        $  2,151               $ 2,263                $ 2,314           $ 2,250 deposit accounts Mortgage banking      529             635                   1,000                  1,593             5,601 revenue, net Net gain on sale of investment         50              -                     -                      2                 (47) securities Investment            715             617                   599                    678               728 products income BOLI income           469             461                   466                    482               486 Derivative credit valuation             (1,162)         (38)                  (710)                  (380)             6 adjustment Other income          1,161           1,123                 1,124                  1,110             1,187  Total non-interest       $  3,977        $  4,949               $ 4,742                $ 5,799           $ 10,211 income Non-interest expense: Salaries and     $  15,992       $  12,884              $ 13,070               $ 12,656          $ 13,019 employee benefits  Commission         811             897                   1,098                  2,001             2,556 expense  Occupancy         3,552           4,266                 3,406                  3,456             3,081 expense  Equipment         2,356           1,749                 1,871                  1,796             1,830 expense  Amortization of intangible         283             284                   455                    540               541 assets  Data              1,281           1,197                 1,223                  995               1,027 processing expense  Professional      2,353           1,486                 4,891                  5,947             5,947 fees  Insurance         1,358           1,467                 1,498                  1,496             1,496 expense  Advertising       523             586                   903                    676               698 expense  Problem loan      566             632                   769                    816               1,023 costs  Real estate       702             144                   529                    252               1,255 owned expense, net  Office            285             251                   245                    192               191 supplies expense  Other expense     3,615           2,045                 2,499                  2,094             1,715 Total non-interest       $  33,677       $  27,888              $ 32,457               $ 32,917          $ 33,239 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 June 30,                      2014                               2013                      Average      Income/    Yield/     Average      Income/    Yield/                      Balance      Expense    Cost       Balance      Expense    Cost Interest-earning assets: Loans receivable ^(1),(2): Commercial           $ 1,480,491  $ 15,385   4.16   %   $ 1,719,278    18,622   4.33   % Home equity            185,710      1,777    3.83         197,237      1,911    3.88 Second mortgage        24,358       326      5.35         28,679       432      6.03 Residential real       338,028      3,187    3.77         307,248      2,485    3.24 estate Other                  23,196       391      6.74         28,929       495      6.84 Total loans            2,051,783    21,066   4.11         2,281,371    23,945   4.20 receivable Investment             451,477      2,723    2.41         373,311      1,751    1.88 securities^(3) Interest-earning       243,052      154      0.25         307,348      192      0.25 bank balances Total interest-earning       2,746,312    23,943   3.49         2,962,030    25,888   3.50 assets Non-interest earning assets:  Cash and due from    41,196                             44,968 banks  Restricted cash      26,000                             26,000  Bank properties      47,586                             49,192 and equipment, net  Goodwill and intangible assets,     38,568                             40,256 net  Other assets         82,765                             99,607 Total non-interest-earning   236,115                            260,023 assets Total assets         $ 2,982,427                        $ 3,222,053 Interest-bearing liabilities: Interest-bearing deposit accounts: Interest-bearing     $ 1,099,385  $ 790      0.29   %   $ 1,244,074    1,094    0.35   % demand deposits Savings deposits       264,386      177      0.27         269,624      220      0.33 Time deposits          582,840      1,223    0.84         677,738      1,632    0.96 Total interest-bearing       1,946,611    2,190    0.45         2,191,436    2,946    0.54 deposit accounts Short-term borrowings: Securities sold under agreements to    598          -        -            2,304        1        0.17 repurchase- customers Long-term borrowings: FHLBNY advances ^(4)   60,887       315      2.07         61,051       318      2.08 Obligations under      7,221        127      7.04         7,504        125      6.66 capital lease Junior subordinated    92,786       533      2.30         92,786       547      2.36 debentures Total borrowings       161,492      975      2.41         163,645      991      2.42 Total interest-bearing       2,108,103    3,165    0.60         2,355,081    3,937    0.67 liabilities Non-interest bearing liabilities:  Non-interest-bearing   573,290                            531,210 demand deposits  Other liabilities    46,918                             72,654 Total non-interest     620,208                            603,864 bearing liabilities Total liabilities      2,728,311                          2,958,945 Shareholders'          254,116                            263,108 equity Total liabilities and shareholders'    $ 2,982,427                        $ 3,222,053 equity Net interest income               $ 20,778                           $ 21,951 Interest rate spread                         2.89   %                           2.83   % ^(5) Net interest margin                          3.03   %                           2.96   % ^(6) Ratio of average interest-earning assets to                                   130.27 %                           125.77 % 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 June 30, 2014 and 2013 were $166 thousand and $175 thousand, respectively. (4) Amounts include Advances from FHLBNY and Securities sold under agreements to repurchase- FHLBNY. (5) Interest rate spread represents the difference between the average yield on interest-earning assets and the average cost of interest-bearing liabilities. (6) Net interest margin represents net interest income as a percentage of average interest-earning assets.    SUN BANCORP, INC. AND SUBSIDIARIES AVERAGE BALANCE SHEETS(Unaudited) (Dollars in thousands)                      For the Six Months Ended June 30,                      2014                                 2013                      Average      Income/    Yield/     Average      Income/   Yield/                      Balance      Expense    Cost       Balance      Expense   Cost Interest-earning assets: Loans receivable ^(1),(2): Commercial           $ 1,520,246  $ 31,735   4.17   %   $ 1,731,846    37,581   4.34   % Home equity            186,377      3,539    3.80         200,755      3,817    3.80 Second mortgage        24,609       683      5.55         29,508       860      5.83 Residential real       334,749      6,145    3.67         319,017      5,556    3.48 estate Other                  24,100       814      6.76         29,665       1,030    6.94 Total loans            2,090,081    42,916   4.11         2,310,791    48,844   4.23 receivable Investment             454,590      5,541    2.44         400,516      4,035    2.01 securities^(3) Interest-earning       231,645      292      0.25         243,658      303      0.25 bank balances Total interest-earning       2,776,316    48,749   3.51         2,954,965    53,182   3.60 assets Non-interest earning assets:  Cash and due from    41,269                             45,867 banks  Restricted cash      26,000                             26,000  Bank properties      48,093                             49,774 and equipment, net  Goodwill and intangible assets,     38,709                             40,618 net  Other assets         85,303                             97,114 Total non-interest-earning   239,374                            259,373 assets Total assets         $ 3,015,690                        $ 3,214,338 Interest-bearing liabilities: Interest-bearing deposit accounts: Interest-bearing     $ 1,124,284  $ 1,597    0.28   %   $ 1,242,974    2,205    0.35   % demand deposits Savings deposits       265,837      357      0.27         267,519      435      0.33 Time deposits          595,459      2,515    0.84         683,431      3,321    0.97 Total interest-bearing       1,985,580    4,469    0.45         2,193,924    5,961    0.54 deposit accounts Short-term borrowings: Securities sold under agreements to    502          -        -            2,613        2        0.15 repurchase- customers Long-term borrowings: FHLBNY advances ^(4)   60,908       628      2.06         61,105       634      2.08 Obligations under      7,257        250      6.89         7,538        251      6.66 capital lease Junior subordinated    92,786       1,065    2.30         92,786       1,093    2.36 debentures Total borrowings       161,453      1,943    2.41         164,042      1,980    2.41 Total interest-bearing       2,147,033    6,412    0.60         2,357,966    7,941    0.67 liabilities Non-interest bearing liabilities:  Non-interest-bearing   566,486                            518,973 demand deposits  Other liabilities    49,631                             74,310 Total non-interest     616,117                            593,283 bearing liabilities Total liabilities      2,763,150                          2,951,249 Shareholders'          252,540                            263,090 equity Total liabilities and shareholders'    $ 3,015,690                        $ 3,214,339 equity Net interest income               $ 42,337                           $ 45,241 Interest rate spread                         2.91   %                           2.93   % ^(5) Net interest margin                          3.05   %                           3.06   % ^(6) Ratio of average interest-earning assets to                                    129.31 %                           125.32 % 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 six months ended June 30, 2014 and 2013 were $333 thousand and $387 thousand, respectively. (4) Amounts include Advances from FHLBNY and Securities sold under agreements to repurchase- FHLBNY. (5) Interest rate spread represents the difference between the average yield on interest-earning assets and the average cost of interest-bearing liabilities. (6) Net interest margin represents net interest income as a percentage of average interest-earning assets.    SUN BANCORP, INC. AND SUBSIDIARIES AVERAGE BALANCE SHEETS(Unaudited) (Dollars in thousands)                      For the Three Months Ended                      June 30, 2014                     March 31, 2014                      Average      Income/   Yield/     Average      Income/   Yield/                      Balance      Expense   Cost       Balance      Expense   Cost Interest-earning assets: Loans receivable ^(1),(2): Commercial           $ 1,480,491  $ 15,385   4.16   %  $ 1,560,442  $ 16,349   4.19   % Home equity            185,710      1,777    3.83        187,052      1,762    3.77 Second mortgage        24,358       326      5.35        24,863       357      5.74 Residential real       338,028      3,187    3.77        331,433      2,958    3.57 estate Other                  23,196       391      6.74        25,014       423      6.76 Total loans            2,051,783    21,066   4.11        2,128,804    21,849   4.11 receivable Investment             451,477      2,723    2.41        457,737      2,818    2.46 securities ^(3) Interest-earning       243,052      154      0.25        220,113      139      0.25 bank balances Total interest-earning       2,746,312    23,943   3.49        2,806,654    24,806   3.54 assets Non-interest earning assets:  Cash and due from    41,196                            41,342 banks  Restricted cash      26,000                            26,000  Bank properties      47,586                            48,605 and equipment, net  Goodwill and intangible assets,     38,568                            38,852 net  Other assets         82,765                            87,868 Total non-interest-earning   236,115                           242,667 assets Total assets         $ 2,982,427                       $ 3,049,321 Interest-bearing liabilities: Interest-bearing deposit accounts: Interest-bearing     $ 1,099,385  $ 790      0.29   %  $ 1,149,460  $ 808      0.28   % demand deposits Savings deposits       264,386      177      0.27        267,305      180      0.27 Time deposits          582,840      1,223    0.84        608,217      1,293    0.85 Total interest-bearing       1,946,611    2,190    0.45        2,024,982    2,281    0.45 deposit accounts Short-term borrowings: Securities sold under agreements to    598          -        -           404          -        - repurchase- customers Long-term borrowings: FHLBNY advances ^(4)   60,887       315      2.07        60,929       313      2.05 Obligations under      7,221        127      7.04        7,293        123      6.75 capital lease Junior subordinated    92,786       533      2.30        92,786       531      2.29 debentures Total borrowings       161,492      975      2.41        161,412      967      2.40 Total interest-bearing       2,108,103    3,165    0.60        2,186,394    3,248    0.59 liabilities Non-interest bearing liabilities:  Non-interest-bearing   573,290                           559,606 demand deposits  Other liabilities    46,918                            52,375 Total non-interest     620,208                           611,981 bearing liabilities Total liabilities      2,728,311                         2,798,375 Shareholders'          254,116                           250,946 equity Total liabilities and shareholders'    $ 2,982,427                       $ 3,049,321 equity Net interest income               $ 20,778                          $ 21,558 Interest rate spread                         2.89   %                          2.95   % ^(5) Net interest margin                          3.03   %                          3.07   % ^(6) Ratio of average interest-earning assets to                                    130.27 %                          128.37 % 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 adjustment for both the three months ended June 30, 2014 and March 31, 2014 was $166 thousand. (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.sunnationalbank.com Contact: Thomas R. Brugger, Executive Vice President and Chief Financial Officer, (856) 552-6031  
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