Sun Bancorp, Inc. Reports First Quarter 2014 Results

VINELAND, N.J., April 23, 2014 /PRNewswire/ --

First Quarter Highlights

  • Announced expected hiring of Thomas O'Brien as CEO, subject to regulatory non-objection
  • Continued progress on expense control as non-interest expense declined by $4.6 million sequentially to $27.9 million
  • Interest bearing cash averaged $220.1 million or 7.2% of average assets
  • Tier 1 Leverage Ratio increased to 9.4% and the total risk based ratio increased to 14.9%

Sun Bancorp, Inc. (NASDAQ: SNBC) (the "Company") reported today a net loss available to common shareholders of $1.9 million, or a loss of $0.02 per diluted share, for the quarter ended March 31, 2014, compared to a net loss of $8.2 million, or a loss of $0.09 per diluted share, and net income of $2.5 million, or $0.03 per diluted share, for the fourth quarter of 2013 and the first quarter of 2013, respectively.

The following are key items and events that occurred during the first quarter of 2014:

  • No provision for loan loss was recorded in the first quarter of 2014 compared to provision expense of $2.1 million in the fourth quarter of 2013. The allowance for loan losses equaled $33.8 million at March 31, 2014, a decrease of $1.8 million from December 31, 2013. The allowance for loan losses equaled 1.62% of gross loans held-for-investment and 90.2% of non-performing loans at March 31, 2014 as compared to 1.66% and 93.6%, respectively, at December 31, 2013.
  • Occupancy expense totaled $4.3 million, an increase of $860 thousand from the prior quarter, as winter weather related expenses totaled $1.0 million in the quarter ended March 31, 2014.
  • Professional fees totaled $1.5 million in the first quarter of 2014 compared to $4.9 million in the prior quarter.
  • Net interest margin was 3.07% in the first quarter of 2014 compared to 2.99% in the fourth quarter of 2013.

"We made good progress in the first quarter on expense reduction efforts, executing on our regulatory remediation efforts and enhancing the capital ratios of the Bank," stated Sid Brown, Chairman, interim President and CEO. "We are disappointed to report a loss but believe that we are taking the necessary steps to get the Bank back on the right path.  We are all looking forward to working with Tom O'Brien on returning the Bank to sustained profitability. Tom O'Brien started working on April 2nd as a consultant to the Board of Directors and is expected to be appointed as CEO, subject to regulatory non-objection to his assumption of the positions of President and CEO."

Discussion of Results:

Balance Sheet

  • Total assets were $3.04 billion at March 31, 2014, as compared to $3.09 billion at December 31, 2013. 
  • Cash and cash equivalents were $282.1 million at March 31, 2014, as compared to $267.8 million at December 31, 2013. The increase of $14.3 million in the first quarter of 2014 as compared to the prior quarter was primarily due to declining loan balances, including those held-for-sale, partially offset by a decrease in deposits.
  • Gross loans held-for-investment were $2.08 billion at March 31, 2014, as compared to $2.14 billion at December 31, 2013, a decline of $53.6 million which was primarily due to loan paydowns.  
  • Deposits were $2.57 billion at March 31, 2014, as compared to $2.62 billion at December 31, 2013.  The decrease of $48.1 million in the first quarter of 2014 as compared to the prior quarter was primarily due to decreases in public funds deposits.

Net Interest Income and Margin

  • Net interest income decreased $543 thousand from the linked quarter to $21.4 million for the three months ended March 31, 2014. The net interest margin increased eight basis points to 3.07% for the three months ended March 31, 2014 from 2.99% for the linked quarter, and decreased nine basis points as compared to the first quarter of 2013. The average yield on interest-earning assets increased seven basis points to 3.54% for the three months ended March 31, 2014 from 3.47% for the three months ended December 31, 2013. The decrease between the quarter ended March 31, 2014 and the comparable prior year period is primarily due to a decline of $184.1 million in average commercial loans and an increase of $40.9 million in average interest earning bank balances. The increase from the linked quarter is due primarily to a decrease of $122.3 million in average interest bearing cash balances.

Non-Interest Income

  • Non-interest income was $4.9 million for the quarter ended March 31, 2014, as compared to $4.7 million for the quarter ended December 31, 2013 and $10.9 million for the comparable prior year quarter. The increase from the linked quarter was primarily attributable to a decrease of $672 thousand in negative derivative credit valuation adjustments from the prior quarter partially offset by a decrease in net mortgage banking revenue of $365 thousand. The decrease in the negative derivative credit valuation adjustments from the prior quarter was primarily due to swap termination fees of $1.0 million recorded in the fourth quarter of 2013, compared to no swap termination fees recorded in the first quarter of 2014. Mortgage banking revenue, net, decreased from $1.0 million for the quarter ended December 31, 2013 to $635 thousand for the quarter ended March 31, 2014, which was due to lower production volume in a higher interest rate environment.

Non-Interest Expense

  • Non-interest expense was $27.9 million in the first quarter of 2014, a decrease of $4.6 million compared to the linked quarter and a decrease of $3.4 million from the comparable prior year quarter.  In comparison to the linked quarter, decreases in professional fees, other real estate owned, advertising, commission expense, and salaries and employee benefits of $3.4 million, $385 thousand, $317 thousand, $201 thousand, and $186 thousand, respectively, were partially offset by an increase of $860 thousand in occupancy expense.  Professional fees declined as the Company reduced its reliance on regulatory compliance consulting services.   Commission expense has decreased due to reduced mortgage production volumes.  Occupancy expense for the first quarter includes $1.0 million of snow removal expenses. 

Asset Quality

  • During the first quarter of 2014, there was no provision expense recorded, as compared to provision expense of $2.1 million in the linked quarter and $171 thousand in the comparable prior year quarter. The allowance for loan losses was $33.8 million, or 1.62% of gross loans held-for-investment, at March 31, 2014, as compared to $35.5 million, or 1.66% of gross loans held-for-investment at December 31, 2013. Net charge-offs were $1.8 million in the first quarter of 2014, as compared to net charge-offs in the linked quarter of $15.5 million and net recoveries in the comparable prior year quarter of $1.1 million.
  • Total non-performing assets were $40.2 million, or 1.91% of total gross loans held-for-investment, loans held-for-sale and real estate owned at March 31, 2014, as compared to $40.5 million, or 1.87%, at December 31, 2013. Non-performing loans decreased $531 thousand to $37.4 million at March 31, 2014 from $38.0 million at December 31, 2013.

Capital

  • Shareholders' equity totaled $248.9 million at March 31, 2014 compared to $245.3 million at December 31, 2013. The Company's tangible equity to tangible assets ratio was 7.01% at March 31, 2014, as compared to 6.77% at December 31, 2013.  At March 31, 2014, the Company's total risk-based capital ratio, Tier 1 capital ratio and leverage capital ratio were approximately 14.87%, 12.75%, and 9.40%, respectively.  At March 31, 2014, Sun National Bank's total risk-based capital ratio, Tier 1 capital ratio and leverage capital ratio were approximately 14.08%, 12.83%, and 9.45%, respectively. 

The Company will hold its regularly scheduled conference call on Thursday April 24, 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 $3.04 billion asset bank holding company 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 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 expenses, executing on our regulatory remediation efforts, enhancing our capital ratios and achieving sustained profitability in the future.  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 expenses, successfully execute on our regulatory remediation efforts, further enhance our capital ratios or achieve sustained profitability in the future. 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, 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 March 31, 2014, December 31, 2013, September 30, 2013, June 30, 2013, and March 31, 2013 were $166 thousand, $167 thousand, $167 thousand, $175 thousand, and $212 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 March 31, 2014, December 31, 2013, September 30, 2013, June 30, 2013, and March 31, 2013 were $38.7 million, $39.0 million, $39.4 million, $40.0 million, and $40.5 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 March 31, 2014, December 31, 2013, September 30, 2013, June 30, 2013, and March 31, 2013.

 

For Three Months Ended:

March 31,
2014


December 31,
2013


September 30,
2013


June 30,
2013


March 31,
2013











Net interest income

$

21,392


$

21,935


$

22,980


$

21,776


$

23,078

Effect of tax exempt income 


166



167



167



175



212

Net interest income, tax equivalent basis

$

21,558


$

22,102


$

23,147


$

21,951


$

23,290

Tangible book value per common share

The following reconciles shareholders' equity to tangible equity by reducing shareholders' equity by the intangible asset balance at March 31, 2014, December, 31, 2013, September 30, 2013, June 30, 2013, and March 31, 2013.


March 31,
2014


December 31,
2013


September 30,
2013


June 30,
2013


March 31,
2013











Tangible book value per common share:










   Shareholders' equity

$

248,898


$

245,337


$

257,140


$

261,664


$

264,341

  Less: Intangible assets


38,709



38,993



39,448



39,988



40,529

Tangible equity

$

210,189


$

206,344


$

217,692


$

221,676


$

223,812
















  Common stock


88,709



88,711



88,618



88,572



88,403

  Less: Treasury stock


1,943



1,997



2,068



2,107



2,107

Total outstanding shares


86,766



86,714



86,550



86,465



86,296
















Tangible book value per common share:

$

2.42


$

2.38


$

2.52


$

2.56


$

2.59

 

 


SUN BANCORP, INC. AND SUBSIDIARIES

FINANCIAL HIGHLIGHTS (Unaudited)

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


For the Three Months Ended


March 31,


December 31,


2014


2013


2013

Profitability for the period:






    Net interest income

$

21,392


$

23,078


$

21,935


    Provision for loan losses


-



171



2,135


    Non-interest income


4,949



10,882



4,742


    Non-interest expense


27,888



31,336



32,457


   (Loss) income before income taxes


(1,547)



2,453



(7,915)


    Income tax expense


359



-



297


    Net (loss) income available to common shareholders

$

(1,906)


$

2,453


$

(8,212)












Financial ratios:










    Return on average assets(1) 


(0.25)

%


0.31

%


(1.02)

%

    Return on average equity(1)


(3.04)

%


3.73

%


(12.79)

%

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


(3.59)

%


4.42

%


(15.10)

%

    Net interest margin(1)


3.07

%


3.16

%


2.99

%

    Efficiency ratio


105.87

%


92.27

%


121.67

%

    (Loss) earnings per common share:










        Basic

$

(0.02)


$

0.03


$

(0.09)


        Diluted 

$

(0.02)


$

0.03


$

(0.09)












    Average equity to average assets


8.23

%


8.20

%


8.01

%


March 31,


December 31,


2014


2013


2013

At period-end:




    Total assets

$

3,038,467


$

3,227,146


$

3,087,553


    Total deposits


2,573,445



2,723,337



2,621,571


    Loans receivable, net of allowance for loan losses


2,050,312



2,204,436



2,102,167


    Loans held-for-sale


16,048



41,469



20,662


    Investments


456,724



335,844



457,797


    Borrowings


68,645



71,344



68,765


    Junior subordinated debentures


92,786



92,786



92,786


    Shareholders' equity


248,898



264,341



245,337












Credit quality and capital ratios:










    Allowance for loan losses to gross loans held-for- investment


1.62

%


2.09

%


1.66

%

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


1.80

%


3.28

%


1.78

%

    Non-performing assets to gross loans held-for-investment, loans held-for-sale and real estate owned


1.91

%


3.57

%


1.87

%

    Allowance for loan losses to non-performing loans held-for-investment


90.18

%


63.87

%


93.57

%











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










        Sun Bancorp, Inc.


14.87

%


14.21

%


14.41

%

        Sun National Bank


14.08

%


13.50

%


13.65

%

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










        Sun Bancorp, Inc.


12.75

%


12.32

%


12.34

%

        Sun National Bank


12.83

%


12.25

%


12.40

%

Leverage ratio:










        Sun Bancorp, Inc.


9.40

%


9.40

%


8.99

%

        Sun National Bank


9.45

%


9.33

%


9.02

%











    Book value per common share

$

2.87


$

3.06


$

2.83


    Tangible book value per common share

$

2.42


$

2.59


$

2.38


(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) March 31, 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)


March 31, 2014


December 31, 2013


ASSETS





Cash and due from banks

$

49,850


$

38,075


Interest-earning bank balances


232,245



229,687


Cash and cash equivalents


282,095



267,762


  Restricted cash


26,000



26,000


Investment securities available for sale (amortized cost of $442,681 and $452,023 at March 31, 2014 and December 31, 2013, respectively)


439,405



440,097


Investment securities held to maturity (estimated fair value of $664 and $692 at March 31, 2014 and December 31, 2013, respectively)


655



681


Loans receivable (net of allowance for loan losses of $33,768 and $35,537 at March 31, 2014 and December 31, 2013, respectively)


2,050,312



2,102,167


Loans held-for-sale, at fair value


16,048



20,662


Restricted equity investments, at cost


16,664



17,019


Bank properties and equipment, net


48,008



49,095


Real estate owned


2,728



2,503


Accrued interest receivable


6,889



7,112


Goodwill


38,188



38,188


Intangible assets, net


521



805


Deferred taxes, net


682



4,575


Bank owned life insurance (BOLI)


77,697



77,236


Other assets


32,575



33,651


Total assets

$

3,038,467


$

3,087,553









LIABILITIES AND SHAREHOLDERS' EQUITY







Liabilities:







Deposits

$

2,573,445


$

2,621,571


Securities sold under agreements to repurchase – customers


471



478


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


60,915



60,956


Obligations under capital lease


7,259



7,331


Junior subordinated debentures


92,786



92,786


Other liabilities


54,693



59,094


Total liabilities


2,789,569



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; 88,709,281 shares issued and 86,766,358 shares outstanding at March 31, 2014; 88,711,035 shares issued and 86,714,414 shares outstanding at December 31, 2012


88,709



88,711


Additional paid-in capital


506,101



506,719


Retained deficit


(319,860)



(317,954)


Accumulated other comprehensive loss


(1,938)



(7,055)


Deferred compensation plan trust


(502)



(522)


Treasury stock at cost, 1,942,923 shares at March 31, 2014; and 1,996,621 shares at December 31, 2013


(23,612)



(24,562)


Total shareholders' equity


248,898



245,337


Total liabilities and shareholders' equity

$

3,038,467


$

3,087,553


 

 


SUN BANCORP, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF OPERATIONS (Unaudited)

(Dollars in thousands, except per share amounts)








For the Three Months

Ended March 31,



2014



2013

INTEREST INCOME






Interest and fees on loans

$

21,849


$

24,899

Interest on taxable investment securities


2,250



1,544

Interest on non-taxable investment securities


309



394

Dividends on restricted equity investments


232



246

Total interest income


24,640



27,083

INTEREST EXPENSE






Interest on deposits


2,281



3,015

Interest on funds borrowed


436



443

Interest on junior subordinated debentures


531



547

Total interest expense


3,248



4,005

Net interest income


21,392



23,078

PROVISION FOR LOAN LOSSES


-



171

Net interest income after provision for loan losses


21,392



22,907

NON-INTEREST INCOME






Service charges on deposit accounts


2,151



2,229

Mortgage banking revenue, net


635



3,404

Gain on sale of investment securities


-



3,487

Investment products income


617



679

BOLI income


461



448

Derivative credit valuation adjustment


(38)



(504)

Other


1,123



1,139

Total non-interest income


4,949



10,882

NON-INTEREST EXPENSE






Salaries and employee benefits


12,884



14,292

Commission expense


897



2,041

Occupancy expense


4,266



3,576

Equipment expense


1,749



1,859

Amortization of intangible assets


284



921

Data processing expense


1,197



999

Professional fees


1,486



2,647

Insurance expenses


1,467



1,430

Advertising expense


586



553

Problem loan expense


632



799

Real estate owned expense, net


144



234

Office supplies expense


251



229

Other


2,045



1,756

Total non-interest expense


27,888



31,336

(LOSS) INCOME BEFORE INCOME TAXES


(1,547)



2,453

INCOME TAX EXPENSE


359



-

NET (LOSS) INCOME AVAILABLE TO COMMON SHAREHOLDERS

$

(1,906)


$

2,453







Basic (loss) earnings per share

$

(0.02)


$

0.03

Diluted (loss) earnings per share

$

(0.02)


$

0.03

Weighted average shares – basic

87,185,839


86,245,121

Weighted average shares - diluted

87,185,839


86,370,435

 

 



SUN BANCORP, INC. AND SUBSIDIARIES


HISTORICAL TRENDS IN QUARTERLY FINANCIAL DATA (Unaudited)


(Dollars in thousands)



2014


2013


2013


2013


2013



Q1


Q4


Q3


Q2


Q1


Balance sheet at quarter end: 











Cash and cash equivalents

$

282,095


$

267,762


$

427,583


$

416,239


$

285,660


Restricted cash


26,000



26,000



26,000



26,000



26,000


Investment securities


456,724



457,797



425,029



361,149



335,844


Loans held-for-investment: 
















        Commercial and industrial


1,519,993



1,587,566



1,636,856



1,676,133



1,737,079


        Home equity 


184,936



188,478



192,135



195,938



200,084


        Second mortgage 


23,312



25,279



26,028



27,276



29,235


        Residential real estate 


326,945



305,552



281,537



225,147



248,875


        Other 


28,894



30,829



32,984



34,298



36,287


            Total gross loans held-for-investment


2,084,080



2,137,704



2,169,540



2,158,792



2,251,560


Allowance for loan losses 


(33,768)



(35,537)



(48,854)



(48,007)



(47,124)


            Net loans held-for-investment


2,050,312



2,102,167



2,120,686



2,110,785



2,204,436


   Loans held-for-sale


16,048



20,662



18,707



69,417



41,469


    Goodwill 


38,188



38,188



38,188



38,188



38,188


    Intangible assets


521



805



1,260



1,800



2,341


    Total assets 


3,038,467



3,087,553



3,236,321



3,205,921



3,227,146


    Total deposits


2,573,445



2,621,571



2,752,693



2,722,038



2,723,337


    Securities sold under agreements to repurchase - customers


471



478



554



562



2,726


    Advances from FHLBNY


60,915



60,956



60,997



61,037



61,077


    Obligations under capital lease


7,259



7,331



7,402



7,472



7,541


    Junior subordinated debentures


92,786



92,786



92,786



92,786



92,786


    Total shareholders' equity


248,898



245,337



257,140



261,664



264,341


Quarterly average balance sheet: 
















    Loans(1)
















        Commercial and industrial 

$

1,560,442


$

1,621,222


$

1,671,302


$

1,719,278


$

1,744,553


        Home equity


187,052



190,394



194,622



197,237



204,311


        Second mortgage 


24,863



26,142



27,041



28,679



30,347


        Residential real estate


331,433



312,977



299,667



307,248



330,916


        Other


25,014



26,134



27,723



28,929



30,410


            Total gross loans 


2,128,804



2,176,869



2,220,355



2,281,371



2,340,537


    Securities and other interest-earning assets 


677,850



782,200



763,575



680,659



607,284


    Total interest-earning assets 


2,806,654



2,959,069



2,983,930



2,962,030



2,947,821


    Total assets 


3,049,321



3,205,900



3,264,884



3,222,053



3,206,536


    Non-interest-bearing demand deposits 


559,606



585,530



549,684



531,210



506,600


    Total deposits 


2,584,588



2,718,905



2,746,820



2,722,646



2,703,039


    Total interest-bearing liabilities 


2,186,394



2,295,072



2,358,923



2,355,081



2,360,883


    Total shareholders' equity 


250,946



256,783



260,701



263,108



263,070


Capital and credit quality measures:
















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
















        Sun Bancorp, Inc.


14.87

%


14.41

%


14.72

%


14.80

%


14.21

%

        Sun National Bank


14.08

%


13.65

%


13.96

%


14.05

%


13.50

%

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
















        Sun Bancorp, Inc.


12.75

%


12.34

%


12.76

%


12.91

%


12.32

%

        Sun National Bank


12.83

%


12.40

%


12.70

%


12.79

%


12.25

%

    Leverage ratio:
















        Sun Bancorp, Inc.


9.40

%


8.99

%


9.13

%


9.43

%


9.40

%

        Sun National Bank


9.45

%


9.02

%


9.09

%


9.33

%


9.33

%

















    Average equity to average assets


8.23

%


8.01

%


7.99

%


8.17

%


8.20

%

    Allowance for loan losses to total gross loans held-for-investment 


1.62

%


1.66

%


 

2.25

%


 

2.22

%


 

2.09

%

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


1.80

%


1.78

%


2.55

%


3.32

%


3.28

%

    Non-performing assets to gross loans held-for-investment, loans held-for-sale and real estate owned


1.91

%


1.87

%


2.76

%


3.51

%


3.57

%

   

 Allowance for loan losses to non-performing loans held-for-investment


 

90.18

 

%


 

93.57

 

%


 

88.19

 

%


 

66.93

 

%


 

63.87

 

%

















Other data:
















Net (charge-offs) recoveries


(1,768)



(15,452)



123



2,766



1,080


Non-performing assets:
















           Non-accrual loans

$

29,387


$

29,811


$

44,976


$

54,031


$

57,151


           Troubled debt restructurings, non-accrual


8,017



8,166



10,419



17,693



16,632


           Loans past due 90 days and accruing


42



-



-



-



-


           Real estate owned, net 


2,728



2,503



5,059



6,743



8,472


                Total non-performing assets

$

40,174


$

40,480



60,454



78,467


$

82,255


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

(2)      March 31, 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


2013


2013


2013


2013



Q1


Q4


Q3


Q2


Q1


Profitability for the quarter:











Tax-equivalent interest income

$

24,806


$

25,667


$

26,955


$

25,886


$

27,295


Interest expense


3,248



3,565



3,808



3,935



4,005


Tax-equivalent net interest income


21,558



22,102



23,147



21,951



23,290


Tax-equivalent adjustment


166



167



167



175



212


Provision for loan losses


-



2,135



724



(1,883)



171


Non-interest income


4,949



4,742



5,799



10,258



10,882


Non-interest expense excluding amortization of intangible assets


27,604



32,002



32,377



32,698



30,415


Amortization of intangible assets


284



455



540



541



921


(Loss) income before income taxes


(1,547)



(7,915)



(4,862)



678



2,453


Income tax expense


359



297



-



-



-


Net (loss) income


(1,906)



(8,212)



(4,862)



678



2,453


Net (loss) income available to common shareholders

$

 

 

(1,906)


$

 

 

(8,212)


$

 

 

(4,862)


$

 

 

678


$

 

 

2,453


Financial ratios:
















Return on average assets (1)


(0.25)

%


(1.02)

%


(0.60)

%


0.08

%


0.31

%

Return on average equity (1)


(3.04)

%


(12.79)

%


(7.46)

%


1.03

%


3.73

%

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


(3.59)

%


(15.10)

%


(8.80)

%


1.22

%


4.42

%

Net interest margin (1)


3.07

%


2.99

%


3.10

%


2.96

%


3.16

%

Efficiency ratio


105.87

%


121.67

%


114.38

%


103.77

%


92.27

%

Per share data:
















(Loss) income per common share:
















Basic

$

(0.02)


$

(0.09)


$

(0.06)


$

0.01


$

0.03


Diluted

$

(0.02)


$

(0.09)


$

(0.06)


$

0.01


$

0.03


Book value

$

2.84


$

2.83


$

2.97


$

3.03


$

3.06


Tangible book value

$

2.42


$

2.38


$

2.52


$

2.56


$

2.59


Average basic shares

87,185,839


86,583,363


86,499,587


86,323,099


86,245,121


Average diluted shares

87,185,839


86,583,363


86,499,587


86,356,796


86,370,435


Non-interest income:
















Service charges on deposit accounts

$

2,151


$

2,263


$

2,314


$

2,250


$

2,229


Mortgage banking revenue, net


635



1,000



1,593



5,601



3,404


Net gain on sale of investment securities


-



-



2






3,487


Investment products income


617



599



678



728



679


BOLI income


461



466



482



486



448


Derivative credit valuation adjustment


(38)



(710)



(380)



6



(504)


Other income


1,123



1,124



1,110



1,187



1,139


        Total non-interest income

$

4,949


$

4,742


$

5,799


$

10,258


$

10,882


Non-interest expense:
















  Salaries and employee benefits

$

12,884


$

13,070


$

12,656


$

13,019


$

14,292


   Commission expense


897



1,098



2,001



2,556



2,041


    Occupancy expense


4,266



3,406



3,456



3,081



3,576


    Equipment expense


1,749



1,871



1,796



1,830



1,859


    Amortization of intangible assets


284



455



540



541



921


    Data processing expense


1,197



1,223



995



1,027



999


    Professional fees


1,486



4,891



5,947



4,761



2,647


    Insurance expense


1,467



1,498



1,496



1,542



1,430


    Advertising expense


586



903



676



698



553


    Problem loan costs


632



769



816



1,023



799


    Real estate owned expense, net


144



529



252



1,255



234


    Office supplies expense


251



245



192



191



229


    Other expense


2,045



2,499



2,094



1,715



1,756


       Total non-interest expense

$

27,888


$

32,457


$

32,917


$

33,239


$

31,336


(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 March 31,



2014


2013



Average


Income/


Yield/


Average


Income/


Yield/ 



Balance


Expense


Cost


Balance


Expense


Cost  


Interest-earning assets:














Loans receivable (1),(2):














Commercial and industrial

$

1,560,442


$

16,349


4.19

%

$

1,744,553



18,959


4.35

%

Home equity


187,052



1,762


3.77



204,311



1,906


3.73


Second mortgage


24,863



357


5.74



30,347



428


5.64


Residential real estate


331,433



2,958


3.57



330,916



3,071


3.71


Other


25,014



423


6.76



30,410



535


7.04


Total loans receivable


2,128,804



21,849


4.11



2,340,537



24,899


4.26


Investment securities(3)


457,737



2,818


2.46



428,024



2,285


2.14


Interest-earning bank balances


220,113



139


0.25



179,260



111


0.25


Total interest-earning assets


2,806,654



24,806


3.54



2,947,821



27,295


3.70


Non-interest earning assets:

















  Cash and due from banks


67,342








72,775







  Bank properties and equipment, net


48,605








50,363







  Goodwill and intangible assets, net


38,852








40,983







  Other assets


87,868








94,594







Total non-interest-earning assets


242,667








258,715







Total assets

$

3,049,321







$

3,206,536
























Interest-bearing liabilities:

















Interest-bearing deposit accounts:

















Interest-bearing demand deposits

$

1,149,460


$

808


0.28

%

$

1,241,861



1,111


0.36

%

Savings deposits


267,305



180


0.27



265,391



215


0.32


Time deposits


608,217



1,293


0.85



689,187



1,689


0.98


Total interest-bearing deposit accounts


2,024,982



2,281


0.45



2,196,439



3,015


0.55


Short-term borrowings:

















Securities sold under agreements to repurchase - customers


404



-


-



2,926



1


0.14


Long-term borrowings:

















FHLBNY advances (4)


60,929



313


2.05



61,160



316


2.07


Obligations under capital lease


7,293



123


6.75



7,572



126


6.66


Junior subordinated debentures


92,786



531


2.29



92,786



547


2.36


Total borrowings


161,412



967


2.40



164,444



990


2.41


Total interest-bearing liabilities


2,186,394



3,248


0.59



2,360,883



4,005


0.68


Non-interest bearing liabilities:

















  Non-interest-bearing demand deposits


559,606







506,600





  Other liabilities


52,375








75,983







Total non-interest bearing liabilities


611,981








582,583







Total liabilities


2,798,375








2,943,466







Shareholders' equity 


250,946








263,070







Total liabilities and shareholders' equity

$

3,049,321







$

3,206,536
























Net interest income




$

21,558







$

23,290




Interest rate spread (5)







2.95

%







3.02

%

Net interest margin (6)







3.07

%







3.16

%

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







128.37

%







124.86

%



(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 March 31, 2014 and 2013 were $166 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 Three Months Ended



March 31, 2014



December 31, 2013



Average


Income/


Yield/



Average


Income/


Yield/



Balance


Expense


Cost



Balance


Expense


Cost


Interest-earning assets:














Loans receivable (1),(2):














Commercial and industrial

$

1,560,442


$

16,349



4.19

%


$

1,621,222


$

17,406



4.29

%

Home equity


187,052



1,762



3.77




190,394



1,853



3.89


Second mortgage


24,863



357



5.74




26,142



367



5.62


Residential real estate


331,433



2,958



3.57




312,977



2,671



3.41


Other


25,014



423



6.76




26,134



456



6.98


Total loans receivable


2,128,804



21,849



4.11




2,176,869



22,753



4.18


Investment securities (3)


457,737



2,818



2.46




439,788



2,693



2.45


Interest-earning bank balances


220,113



139



0.25




342,412



221



0.26


Total interest-earning assets


2,806,654



24,806



3.54




2,959,069



25,667



3.47


Non-interest earning assets:




















  Cash and due from banks


67,342










66,662








  Bank properties and equipment, net


48,605










49,300








  Goodwill and intangible assets, net


38,852










39,190








  Other assets


87,868










91,679








Total non-interest-earning assets


242,667










246,831








Total assets

$

3,049,321









$

3,205,900




























Interest-bearing liabilities:




















Interest-bearing deposit accounts:




















Interest-bearing demand deposits

$

1,149,460


$

808



0.28

%


$

1,223,184


$

960



0.31

%

Savings deposits


267,305



180



0.27




268,196



195



0.29


Time deposits


608,217



1,293



0.85




641,995



1,421



0.89


Total interest-bearing deposit accounts


2,024,982



2,281



0.45




2,133,375



2,576



0.48


Short-term borrowings:




















Fed Funds Purchased


-



-



-




54



-



-


Securities sold under agreements to repurchase - customers


404



-



-




512



-



-


Long-term borrowings:




















FHLBNY advances (4)


60,929



313



2.05




60,981



320



2.10


Obligations under capital lease


7,293



123



6.75




7,364



124



6.74


Junior subordinated debentures


92,786



531



2.29




92,786



545



2.35


Total borrowings


161,412



967



2.40




161,697



989



2.45


Total interest-bearing liabilities


2,186,394



3,248



0.59




2,295,072



3,565



0.62


Non-interest bearing liabilities:




















  Non-interest-bearing demand deposits


559,606










585,530








  Other liabilities


52,375










68,515








Total non-interest bearing liabilities


611,981










654,045








Total liabilities


2,798,375










2,949,117








Shareholders' equity 


250,946










256,783








Total liabilities and shareholders' equity

$

3,049,321









$

3,205,900




























Net interest income




$

21,558









$

22,102





Interest rate spread (5)








2.95

%









2.85

%

Net interest margin (6)








3.07

%









2.99

%

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








128.37

%









128.93

%



(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 March 31, 2014 and December 31, 2013 were $166 thousand and $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.

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