Sun Bancorp, Inc. Reports 2Q 2015 Net Income of $2.8 Million, or $0.15 per share; Improvement in Loan Growth, Capital Ratios and Expense Management

MOUNT LAUREL, N.J., July 27, 2015 /PRNewswire/ --

Second Quarter Highlights

  • Net income of $2.8 million, or $0.15 per share, for the quarter ended June 30, 2015, and $5.6 million, or $0.30 per share, for first half of 2015.
  • Net loan growth of $95 million, or 6.5%, in second quarter.
  • Solid capital foundation in place as tangible equity to assets improves from 6.6% in at June 30, 2014 to 9.2% at June 30, 2015.
  • Asset quality metrics remain strong with non-performing assets down 68% since June 30, 2014 to $6.2 million, or 0.3% of total assets at June 30, 2015.
  • Excess liquidity has declined, but remains elevated: average interest bearing cash totaled $329 million in the second quarter as liquidity deployment efforts increased, as compared to $475 million in the first quarter.
  • Quarterly operating expenses fall to $18.4 million with successful achievement of cost reduction goals representing an impressive 43% reduction when compared to the 2013 quarterly average.

Sun Bancorp, Inc. (NASDAQ: SNBC) (the "Company"), the holding company for Sun National Bank (the "Bank"), is reporting net income of $2.8 million, or $0.15 per diluted share, for the quarter ended June 30, 2015, compared to net income of $2.8 million, or $0.15 per diluted share, for the quarter ended March 31, 2015 and a net loss of $24.2 million, or a loss of $1.39 per diluted share, for the quarter ended June 30, 2014. 

"We are generally pleased with the results of the second quarter and even more so with the underlying trends," said Thomas M. O'Brien, President & CEO.  "The major restructuring announced at this time last year represented an aggressive multi-pronged attack on several legacy conditions which were creating unacceptable operating losses year after year.  In a few short quarters, we have successfully executed on the restructuring plan as evidenced by this quarter's results.  Most impressively, operating expenses which had been running at $32.5 million per quarter in 2013 have been reduced by 43% to $18.4 million while capital ratios are much improved and net interest margin has begun to rebound.  Additionally, the Company's asset quality measures which had been deficient for many years are now among the strongest in the region.  We knew that it would be a challenge to execute on so many initiatives while preparing to build back revenues in our new, more narrowly focused commercial banking strategies.  This renewed focus on growth combined with our ongoing efforts to improve cost efficiency and operate in a safe and sound manner has set the stage for creating shareholder value." 

Discussion of Results:

Balance Sheet

Total assets decreased to $2.38 billion at June 30, 2015, as compared to $2.43 billion at March 31, 2015 and $2.72 billion at December 31, 2014.  The decrease was due primarily to a decrease in cash and cash equivalents, partially offset by loan growth.  The Bank's liquidity levels remain elevated, although cash and cash equivalents decreased to $278.9 million at June 30, 2015, as compared to $388.0 million at March 31, 2015 and $548.4 million at December 31, 2014. The overall decrease in cash and cash equivalents over the recent three and six month periods was primarily due to increases in loan originations, purchases of several multifamily loan participations and the completion of the sale of seven Bank locations in the first quarter of 2015.

Gross loans held-for-investment totaled $1.59 billion at June 30, 2015, as compared to $1.46 billion at March 31, 2015 and $1.49 billion at December 31, 2014.  The increase during the second quarter of 2015 was due primarily to the Bank funding approximately $48 million of 50% participation interest in multi-family loans residing in our market area, while organic loan originations totaled $137 million, including approximately $113 million in commercial real estate and $24 million in commercial and industrial loans.

Deposits were $1.88 billion at June 30, 2015, as compared to $1.96 billion at March 31, 2015 and $2.09 billion at December 31, 2014. The Bank continues to experience deposit reductions as a result of managed run-off of higher yielding municipal accounts and pricing of certain retail deposits. 

The Bank designated $4.6 million in loans, $34.7 million in deposits, $580 thousand of cash and $375 thousand of fixed assets into held-for-sale at June 30, 2015 related to the pending sale of its Hammonton branch location to Cape Bank, which is scheduled to close in the third quarter of 2015. The Bank expects to record a gain on the sale of this location at closing.

"We began to see the results of our liquidity deployment efforts in the second quarter," said O'Brien.  "Against the backdrop of our new relationship-based business development approach, we enjoyed net loan growth through our commercial platform, and the Bank's non-interest demand deposits increased each month through the second quarter.  Continued relationship-based originations and the pending Hammonton branch sale will help us continue to further optimize our liquidity and right size our balance sheet.  While liquidity remains elevated, we have taken a cautious approach to its deployment in light of conflicting economic conditions."

Net Interest Income and Margin

The net interest margin was 2.79% for the three months ended June 30, 2015 as compared to 2.57% for the three months ended March 31, 2015 and 3.03% for the three months ended June 30, 2014.  The increase in net interest margin for the three months ended June 30, 2015 as compared to the three months ended March 31, 2015 is primarily due to the increase in the average commercial loan balances, which increased by $43.6 million, or 4% over the prior quarter and a reduction in average cash balances.

"Our net interest margin continues to be below its optimal level as a result of our excess liquidity," said O'Brien. "However, we are pleased with the net interest income increase from the first quarter as a result of the growth in our loan portfolio," said O'Brien.  "Once we fully deploy our excess liquidity, we anticipate seeing our margin stabilize in the range of 3.10% to 3.20%.  We also continued to manage our deposit interest expense to more accurately reflect the market and the costs of providing our banking services, which led to a further decrease in deposit interest expense in the second quarter.  We believe our relationship approach to originating loans and gathering deposits is expected to gradually bring our net interest margin to forecasted levels."

Non-Interest Income

Non-interest income was $4.9 million for the quarter ended June 30, 2015, as compared to $13.1 million and $4.0 million for the quarters ended March 31, 2015 and June 30, 2014, respectively. The decrease from the linked quarter was primarily attributable to a $9.2 million gain on the sale of seven Cape May area bank locations that was completed in the first quarter of 2015. Offsetting this decrease was a gain of $1.2 million on the sale of loans in the three months ended June 30, 2015. There were modest declines in deposit service charges and fees of $155 thousand and $614 thousand from the quarters ended March 31, 2015 and June 30, 2014, respectively, due to the overall reduction in accounts as a result of the branch reductions that have occurred over the past year. The three months ended June 30, 2014 included swap termination costs of $1.4 million associated with commercial loan sales recorded as a reduction of other income.  The quarter ended June 30, 2014 also included net mortgage banking revenue of $529 thousand, compared to $0 in the current quarter due to the prior year closure of the Company's mortgage banking operations. 

Non-Interest Expense

Non-interest expense for the second quarter of 2015 was $18.4 million, a decrease of $6.9 million from the first quarter of 2015 and a decrease of $15.3 million from the second quarter of 2014. During the first quarter of 2015, the Company recorded several restructuring charges related to the finalization of the Bank's branch rationalization efforts, including $3.3 million of expenses associated with the pending branch consolidations and the sale of the Hammonton branch location. In the first quarter of 2015, problem loan expense of $988 thousand included $667 thousand of one-time costs associated with loan sales. In the second quarter of 2015, the balance in this category was $38 thousand due to significantly reduced volume. 

"While we are still carrying lingering occupancy costs from our previously-announced branch consolidations, our quarterly expenses fell to $18.4 million, representing an annualized run rate of $73 million, well below our previous annualized level of $130 million in 2013," said O'Brien.  "We are pleased with this substantial decline in operating expenses in the one year since our restructuring announcement, and it has effectively liberated the Bank from the substantial legacy expense burdens that were a consistent impediment to our operating profitability.  As a result, we are now actively investing our resources into relationship revenue generation and business development activities and the fruits of that labor are beginning to pay off.  With the remainder of our branch consolidations and pending Cape Bank sale taking place throughout the third quarter, we anticipate approaching a normalized operating expense run rate in the fourth quarter.  We will however, experience the final $500 thousand residual accelerated depreciation expense on these locations in the upcoming third quarter."

Asset Quality

Non-performing assets continued to decline in the second quarter as the balance declined from $10.7 million at March 31, 2015 to $6.2 million at June 30, 2015 due to the sale of non-performing loans held-for-sale during the second quarter. Non-performing loans held-for-investment to total gross loans held-for-investment remained relatively flat at 0.37% at June 30, 2015 as compared to 0.36% at March 31, 2015 and declined from 0.73% at December 31, 2014. 

There was negative provision for loan losses of $1.2 million recorded during the second quarter of 2015 compared to no provision for loan losses in the first quarter of 2015 and $14.8 million of provision for loan losses in the second quarter of 2014. In the second quarter of 2015, the Bank recorded gross recoveries of $2.1 million and recorded gross charge-offs of $1.1 million related to the transfer of problem loans to held-for-sale. The Bank recorded net recoveries of $615 thousand in the second quarter of 2015 as compared to net charge-offs of $2.3 million in the first quarter of 2015 and net charge-offs of $20.2 million in the second quarter of 2014. The allowance for loan losses was $20.3 million, or 1.29% of gross loans held-for-investment, at June 30, 2015, as compared to $20.9 million, or 1.41% of gross loans held-for-investment, at March 31, 2015 and $23.2 million, or 1.54% of gross loans held-for-investment, at December 31, 2014. The allowance for loan losses was 347% of non-performing loans held-for-investment at June 30, 2015 as compared to 383% at March 31, 2015 and 210% at December 31, 2014.

"Our asset quality metrics continue to be strong," said O'Brien.  "Now that we have reduced our classified loans to very low levels, we are focused on proactively managing the risk in the existing portfolio and underwriting new deals conservatively to ensure that our risk profile remains safe and sound.  We are extremely pleased with the progress we have made in improving the quality of our portfolio."

Capital

At June 30, 2015, the capital ratios of the Company and the Bank increased due to planned balance sheet runoff and net income of $2.8 million in the second quarter of 2015. At June 30, 2015, the Bank's Tier 1 common equity risk-based capital ratio, total risk-based capital ratio, Tier 1 risk-based capital ratio and leverage capital ratio were approximately 17.5%, 18.8%, 17.5% and 11.5%, respectively. At June 30, 2015, the Company's Tier 1 common equity risk-based capital ratio, total risk-based capital ratio, Tier 1 risk-based capital ratio and leverage capital ratio were approximately 13.8%, 20.8%, 17.2%, and 11.3%, respectively. The Company's tangible equity to tangible assets ratio was 9.2% at June 30, 2015, as compared to 8.8% at March 31, 2015 and 7.7% at December 31, 2014. 

"With two consecutive profitable quarters, we have been able to internally generate $5.6 million in capital through the first six months of 2015," said O'Brien. "That, along with declining total assets and a further reduction in risk-weighted assets improved our solid regulatory capital ratios.  Our asset quality and capital metrics are near the top of our peer group.  This solid foundation gives us the capacity to now prudently grow our loan portfolio and revenues.  This quarter, we began to make progress in reducing our stubbornly-elevated efficiency ratio.  While we continue to have work ahead of us in growing revenue, managing expenses, controlling risk and building a brand, our goal remains to consistently create shareholder value and obtain the removal of our regulatory order.  This quarter is another significant step forward and it demonstrated our ability to generate earnings and operate with safe and sound practices."

Conference Call

The Company will hold a conference call on Monday, July 27, 2015 at 11:00 AM (EDT) to discuss results and answer questions from analysts and investors.  Participants may listen to or participate in the Company's earnings conference call via the following:

  • Participants Toll-Free Number: 888-765-5574
  • Conference ID: 5330628

About Sun Bancorp, Inc.

Sun Bancorp, Inc. (NASDAQ: SNBC) is a $2.38 billion asset bank holding company headquartered in Mount Laurel, New Jersey. Its primary subsidiary is Sun National Bank, a community 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, which may be identified by the use of such words as "allow," "anticipate," "believe," "continues," "could," "estimate," "expect," "intend," "may," "opportunity," "outlook," "plan," "potential," "predict," "project," "reflects," "should," "typically," "usually," "view," "will," "would," and similar terms and phrases, including references to assumptions.  Examples of forward-looking statements include, but are not limited to, estimates with respect to the financial condition, results of operations and business of Sun Bancorp, Inc. (the "Company") and its wholly-owned subsidiary Sun National Bank (the "Bank"), the banking industry, the economy in general, expectations of the business environment in which the Company operates, projections of future performance and other statements contained herein that are not historical facts.  These remarks are based upon current management expectations, and may, therefore, involve risks and uncertainties that cannot be predicted or quantified and are beyond the Company's control and are subject to a variety of uncertainties that could cause future results to vary materially from the Company's historical performance, or from current expectations.  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)  the ability of the Bank to comply with its written agreement with the Office of the Comptroller of the Currency (the "OCC") or the individual minimum capital ratio for the Bank established by the OCC; (ii) the Company's ability to attract and retain key management and staff; (iii) changes in business strategy or an inability to execute strategy due to the occurrence of unanticipated events; (iv) the ability to complete any or all of the transactions contemplated in the Company's comprehensive strategic restructuring plan on the terms currently contemplated; (v) the ability to attract deposits and other sources of liquidity; (vi) changes in the financial performance and/or condition of the Bank's borrowers; (vii) changes in consumer spending, borrowing and saving habits; (viii) the ability to increase market share and control expenses; (ix) changes in estimates of future loan loss reserve requirements based upon the periodic review thereof under relevant regulatory and accounting requirements; (x) local, regional and national economic conditions and events and the impact they may have on the Company and its customers; (xi) volatility in the credit and equity markets and its effect on the general economy; (xii) the credit risks of lending activities, including changes in the level and trend of loan delinquencies and write-offs; (xii) the overall quality of the composition of the Company's loan and securities portfolios; (xiv) inflation, interest rate, securities market and monetary fluctuations;(xv) legislative and regulatory changes, including the Dodd-Frank Wall Street Reform and Consumer Protection Act and impending regulations, changes in banking, securities and tax laws and regulations and their application by regulators and changes in the scope and cost of the Federal Deposit Insurance Corporation insurance and other coverages; (xvi) the effects of, and changes in, monetary and fiscal policies and laws, including interest rate policies of the Board of Governors of the Federal Reserve System; (xvii) competition among providers of financial services; (xviii) other economic, competitive, governmental, regulatory and technological factors affecting our operations, pricing, products and services and the other risks 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, 2014, the Company's Form 10-Q for the quarter ended March 31, 2015 and in other filings made pursuant to the Securities Exchange Act of 1934, as amended.  No undue reliance should be placed 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 such 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 tangible book value per common share and return on average tangible equity, which are non-GAAP financial measures. Management believes that tangible book value per common share and return on average tangible equity are meaningful financial measures because they are two of the measures we use to assess capital adequacy.

Tangible book value per common share (dollars in thousands)

The following reconciles shareholders' equity to tangible equity by reducing shareholders' equity by the intangible asset balance at June 30, 2015, March 31, 2015, December 31, 2014, September 30, 2014, and June 30, 2014.


June
30, 2015


March
31, 2015


December
31, 2014


September
30, 2014


June
30, 2014











Tangible book value per common share:










    Shareholders' equity

$

252,926


$

249, 235


$

245,323


$

247,047


$

227,656

Less: Intangible assets


38,188



38,188



38,188



38,188



38,426

Tangible equity

$

214,738


$

211,047


$

207,135


$

208,859


$

189,230
















  Common stock


18,901



18,901



18,901



18,885



17,752

  Less: Treasury stock


237



282



285



300



319

Total outstanding shares


18,664



18,619



18,616



18,585



17,433
















Tangible book value per common share:

$

11.51


$

11.34


$

11.13


$

11.24


$

10.85

 

Return on Average Tangible Equity (dollars in thousands)

The following provides the calculation of return on tangible equity for the three months ended June 30, 2015, March 31, 2015, December 31, 2014, September 30, 2014, and June 30, 2014.


Three Months Ended


June
30, 2015


March
31, 2015


December
31, 2014


September
30, 2014


June

30, 2014











Net income(loss)

$

2,825


$

2,776


$

(2,829)


$

(825)


$

(24,248)
















Average tangible equity:















     Average shareholders' equity

$

252,391


$

249,970


$

249,313


$

243,020


$

254,116

 Less: Average intangible assets


38,188



38,188



38,188



38,281



38,568

Average tangible equity

$

214,203


$

211,782


$

211,125


$

204,739


$

215,548
















Return on average tangible equity(1):


5.3

%


5.2

%


(5.4)

%


(1.6)

%


(45.0)%


(1) Annualized

 

SUN BANCORP, INC. AND SUBSIDIARIES


FINANCIAL HIGHLIGHTS (Unaudited)


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




For the Three Months Ended


For the Six Months Ended




June 30,


June 30,





2015



2014




2015



2014



Profitability for the period:
















   Net interest income


$

15,375


$

20,612



$

30,566


$

42,004



   Provision for loan losses



(1,218)



14,803




(1,218)



14,803



   Non-interest income



4,879



3,977




17,966



8,926



   Non-interest expense



18,363



33,677




43,581



61,565



   Income(loss) before income taxes



3,109



(23,891)




6,169



(25,438)



   Income tax expense



284



357




568



716



   Net income(loss) available to common shareholders


$

2,825


$

(24,248)



$

5,601


$

(26,154)



















Financial ratios:
















   Return on average assets(1)



0.5

%


(3.3)

%



0.4

%


(1.7)

%


   Return on average equity(1)



4.5

%


(38.2)

%



4.5

%


(20.7)

%


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



5.3

%


(45.0)

%



5.3

%


(24.5)

%


   Net interest margin(1)



2.79

%


3.03

%



2.68

%


3.05

%


   Efficiency ratio



91

%


137

%



90

%


121

%


   Income(loss) per common share:
















      Basic(3)


$

0.15


$

(1.39)



$

0.30


$

(1.50)



      Diluted(3)


$

0.15


$

(1.39)



$

0.30


$

(1.50)



















Average equity to average assets



10.4

%


8.5

%



10.0

%


8.37

%






June 30,


December 31,







2015

2014


2014





At period-end:









    Total assets


$

2,379,023


$

2,894,658



2,715,348





    Total deposits



1,876,721



2,272,765



2,091,904





    Loans receivable, net of allowance for loan losses



1,558,576



1,827,724



1,486,898





    Loans held-for-sale



2,006



29,171



4,083





    Investments



353,245



454,051



409,950





    Borrowings



92,578



68,734



68,978





    Junior subordinated debentures



92,786



92,786



92,786





    Shareholders' equity



252,926



227,656



245,323



















Credit quality and capital ratios:














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



1.29

%


1.53

%


1.54

%




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



0.37

%


0.76

%


0.73

%




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



0.71

%


1.02

%


1.03

%




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



347

%


202

%


210

%


















Tier 1 common equity risk-based capital(4)(5):














        Sun Bancorp, Inc.



13.8

%


-



-





        Sun National Bank



17.5

%


-



-





    Total risk-based capital(4):














        Sun Bancorp, Inc.



20.8

%


15.0

%


19.3

%




        Sun National Bank



18.8

%


14.5

%


17.4

%




Tier 1 risk-based capital(4):














        Sun Bancorp, Inc.



17.2

%


12.4

%


16.7

%




        Sun National Bank



17.5

%


13.2

%


16.1

%




Leverage capital(4):














        Sun Bancorp, Inc.



11.3

%


8.6

%


10.1

%




        Sun National Bank



11.5

%


9.1

%


9.7

%




    Book value per common share (3)


$

13.55


$

13.39


$

13.18





    Tangible book value per common share (3)


$

11.51


$

11.34


$

11.13





(1) Amounts for the three months ended are annualized.


(2) Return on average tangible equity, a non-GAAP measure, 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) Prior periods were retroactively adjusted for the impact of the 1-for-5 reverse stock split completed on August 11, 2014.

(4) June 30, 2015 capital ratios are estimated, subject to regulatory filings.

(5) The Basel III guidelines and the Dodd-Frank Act established a new minimum Tier 1 common equity risk-based capital ratio, effective January 1, 2015.



 

SUN BANCORP, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION (Unaudited)

(Dollars in thousands, except par value amounts)


June 30, 
2015


December 31,
2014


ASSETS





Cash and due from banks

$

28,544


$

42,548


Interest-earning bank balances


250,319



505,885


Cash and cash equivalents


278,863



548,433


  Restricted cash


5,000



13,000


Investment securities available for sale (amortized cost of $336,979 and
   $394,733 at June 30, 2015 and December 31, 2014, respectively)


337,229



394,500


Investment securities held to maturity (estimated fair value of $470 and $501 at
   June 30, 2015 and December 31, 2014, respectively)


462



489


Loans receivable (net of allowance for loan losses of $20,331 and $23,246 at
   June 30, 2015 and December 31, 2014, respectively)


1,558,599



1,486,898


Loans held-for-sale, at lower of cost or market


2,006



4,083


Branch assets held-for-sale


5,604



69,064


Restricted equity investments, at cost


15,554



14,961


Bank properties and equipment, net


35,090



40,155


Real estate owned


-



522


Accrued interest receivable


5,233



5,397


Goodwill


38,188



38,188


Bank owned life insurance (BOLI)


80,147



79,132


Other assets


17,048



20,526


Total assets

$

2,379,023


$

2,715,348









LIABILITIES AND SHAREHOLDERS' EQUITY







Liabilities:







Deposits

$

1,876,721


$

2,091,904


Branch deposits held-for-sale


34,689



183,395


Securities sold under agreements to repurchase – customers


-



1,156


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


85,698



60,787


Obligations under capital lease


6,880



7,035


Junior subordinated debentures


92,786



92,786


Deferred taxes, net


2,275



1,514


Other liabilities


27,048



31,448


Total liabilities


2,126,097



2,470,025









Shareholders' equity:







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


-



-


Common stock, $5 par value, 40,000,000 shares authorized; 18,901,124 shares
   issued and 18,664,268 shares outstanding at June 30, 2015; 18,900,877
   shares issued and 18,615,950 shares outstanding at December 31, 2014


94,506



94,508


Additional paid-in capital


511,975



514,071


Retained deficit


(342,158)



(347,761)


Accumulated other comprehensive loss


148



(138)


Deferred compensation plan trust


(599)



(599)


Treasury stock at cost, 236,856 shares at June 30, 2015; and 284,927 shares at
   December 31, 2014


(10,946)



(14,757)


Total shareholders' equity


252,926



245,324


Total liabilities and shareholders' equity

$

2,379,023


$

2,715,348


 

SUN BANCORP, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF OPERATIONS (Unaudited)

(Dollars in thousands, except per share amounts)
















For the Three Months
Ended June 30,




For the Six Months
Ended June 30,




2015



2014




2015



2014


INTEREST INCOME














Interest and fees on loans

$

15,451


$

21,067



$

30,549


$

42,916


Interest on taxable investment securities


1,831



2,193




3,877



4,443


Interest on non-taxable investment securities


309



308




615



617


Dividends on restricted equity investments


202



209




411



441


Total interest income


17,793



23,777




35,452



48,417


INTEREST EXPENSE














Interest on deposits


1,337



2,188




2,843



4,469


Interest on funds borrowed


536



443




966



879


Interest on junior subordinated debentures


545



534




1,077



1,065


Total interest expense


2,418



3,165




4,886



6,413


Net interest income


15,375



20,612




30,566



42,004


PROVISION FOR LOAN LOSSES


(1,218)



14,803




(1,218)



14,803


Net interest income after provision for loan losses


16,593



5,809




31,784



27,201


NON-INTEREST INCOME














Deposit service charges and fees


1,849



2,463




3,853



4,858


Interchange fees


554



629




1,098



1,192


Mortgage banking revenue, net


-



529




-



1,164


Gain on sale of bank branches


-



-




9,235



-


Gain on sale of loans


1,226



-




1,239



-


Investment products income


488



715




1,077



1,332


BOLI income


503



469




1,015



930


Other


259



(828)




449



(550)


Total non-interest income


4,879



3,977




17,966



8,926


NON-INTEREST EXPENSE














Salaries and employee benefits


9,120



16,803




19,710



30,584


Occupancy expense


3,034



3,552




8,001



7,818


Equipment expense


1,500



2,356




5,014



4,105


Data processing expense


1,304



1,281




2,612



2,478


Professional fees


711



2,353




1,547



3,839


Insurance expenses


1,094



1,358




2,341



2,825


Advertising expense


223



523




458



1,109


Problem loan expense


38



566




1,026



1,198


Other


1,339



4,885




2,872



7,609


Total non-interest expense


18,363



33,677




43,581



61,565


INCOME(LOSS) BEFORE INCOME TAXES


3,109



(23,891)




6,169



(25,438)


INCOME TAX EXPENSE


284



357




568



716


NET INCOME(LOSS) AVAILABLE TO COMMON
   SHAREHOLDERS

$

2,825


$

(24,248)



$

5,601


$

(26,154)
















Basic earnings(loss) per share(1)

$

0.15


$

(1.39)



$

0.30


$

(1.50)


Diluted earnings(loss) per share(1)

$

0.15


$

(1.39)



$

0.30


$

(1.50)


Weighted average shares – basic(1)

18,632,526


17,417,829



18,624,585


17,383,192


Weighted average shares - diluted(1)

18,684,597


17,417,829



18,663,721


17,383,192



















(1) Prior periods were retroactively adjusted for the impact of the 1-for-5 reverse stock split completed on August 11, 2014

 

SUN BANCORP, INC. AND SUBSIDIARIES


HISTORICAL TRENDS IN QUARTERLY FINANCIAL DATA (Unaudited)


(Dollars in thousands)



2015


2015


2014


2014


2014



Q2


Q1


Q4


Q3


Q2


Balance sheet at quarter end: 











Cash and cash equivalents

$

278,863


$

388,021


$

548,433


$

504,353


$

330,440


Restricted cash


5,000



13,000



13,000



13,000



26,000


Investment securities


353,245



367,178



409,950



425,079



454,051


Loans held-for-investment: 
















        Commercial and industrial


1,153,310



1,042,821



1,052,932



1,196,767



1,363,900


        Home equity 


139,789



145,806



174,165



173,227



186,953


        Residential real estate 


266,312



273,118



276,993



299,838



298,063


        Other 


19,519



22,427



6,054



6,577



7,200


            Total gross loans held-for-investment


1,578,930



1,484,172



1,510,144



1,676,409



1,856,116


Allowance for loan losses 


(20,331)



(20,916)



(23,246)



(26,540)



(28,392)


            Net loans held-for-investment


1,558,599



1,463,256



1,486,898



1,649,869



1,827,724


   Loans held-for-sale


2,006



4,766



4,083



7,365



29,171


   Branch assets held-for-sale


5,604



5,419



69,064



31,408



34,058


   Goodwill 


38,188



38,188



38,188



38,188



38,188


   Intangible assets


-



-



-



-



238


   Total assets 


2,379,023



2,436,391



2,715,348



2,820,202



2,894,658


   Total deposits


1,876,721



1,959,556



2,091,904



2,170,627



2,272,765


   Branch deposits held-for-sale


34,689



33,381



183,395



192,068



160,769


   Securities sold under agreements to repurchase - customers


-



156



1,156



963



670


   Advances from FHLBNY


85,698



60,743



60,787



60,830



60,873


   Obligations under capital lease


6,880



6,958



7,035



7,111



7,191


   Junior subordinated debentures


92,786



92,786



92,786



92,786



92,786


   Total shareholders' equity


252,926



249,235



245,323



247,047



227,656


Quarterly average balance sheet: 
















    Loans(1)
















        Commercial and industrial 

$

1,095,202


$

1,051,610


$

1,145,297


$

1,292,705


$

1,480,491


        Home equity


161,698



183,753



196,841



201,754



210,068


        Residential real estate


271,585



284,197



301,326



322,751



338,028


        Other


2,122



3,233



3,391



3,755



23,196


            Total gross loans 


1,530,607



1,522,793



1,646,855



1,820,965



2,051,783


    Securities and other interest-earning assets 


699,687



867,633



923,909



840,541



694,529


    Total interest-earning assets 


2,230,294



2,390,426



2,570,764



2,661,506



2,746,312


    Total assets 


2,419,520



2,600,231



2,785,525



2,888,920



2,982,427


    Non-interest-bearing demand deposits 


521,563



559,793



608,396



612,775



573,290


Total deposits


1,956,592



2,162,142



2,331,934



2,429,606



2,519,901


    Total interest-bearing liabilities 


1,617,176



1,763,062



1,885,250



1,978,480



2,108,103


    Total shareholders' equity 


252,391



249,970



249,313



243,020



254,116


Capital and credit quality measures:
















   Tier 1 common equity risk-based capital (2),(3):
















       Sun Bancorp, Inc.


13.8

%


13.4

%


-



-



-


       Sun National Bank


17.5

%


17.2

%


-



-



-


Total risk-based capital (2):
















        Sun Bancorp, Inc.


20.8

%


20.4

%


19.3

%


17.9

%


15.0

%

        Sun National Bank


18.8

%


18.4

%


17.4

%


16.2

%


14.5

%

    Tier 1 risk-based capital (2):

















        Sun Bancorp, Inc.


17.2

%


16.8

%


16.7

%


15.6

%


12.4

%

        Sun National Bank


17.5

%


17.1

%


16.1

%


14.9

%


13.2

%

    Leverage capital (2):
















        Sun Bancorp, Inc.


11.3

%


10.3

%


10.1

%


9.8

%


8.6

%

        Sun National Bank


11.5

%


10.5

%


9.7

%


9.4

%


9.1

%

















    Average equity to average assets


10.4

%


9.6

%


9.0

%


8.4

%


8.5

%

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


1.29

%


1.41

%


1.54

%


1.58

%


1.50

%

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


0.37

%


0.36

%


0.73

%


0.84

%


0.76

%

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


0.40

%


0.72

%


1.03

%


1.07

%


1.02

%

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


347

%


383

%


210

%


188

%


202

%

















Other data:
















Net recoveries (charge-offs)

$

615


$

(2,312)


$

(3,294)


$

(1,852)


$

(20,179)


Classified loans


7,940



8,461



24,261



21,022



33,077


Classified assets


11,147



11,998



27,986



25,338



38,226


Non-performing assets:
















           Non-accrual loans


5,156



4,611



10,729



13,561



13,470


       Non-accrual loans held-for-sale


389



4,766



4,083



2,770



4,086


           Troubled debt restructurings, non-accrual


702



854



318



528



583


           Real estate owned, net 


-



468



522



1,084



1,327


                Total non-performing assets

$

6,247


$

10,699


$

15,652


$

17,943


$

19,466


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

(2)      June 30, 2015 capital ratios are estimated, subject to regulatory filings.

(3)      The Basel III guidelines and the Dodd-Frank Act established a new minimum Tier 1 common equity risk-based capital ratio, effective January 1, 2015.




















 

SUN BANCORP, INC. AND SUBSIDIARIES


HISTORICAL TRENDS IN QUARTERLY FINANCIAL DATA (Unaudited)


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

 



2015


2015


2014


2014


2014



Q2


Q1


Q4


Q3


Q2


Profitability for the quarter:











Net interest income

$

15,375


$

15,191


$

17,026


$

18,921


$

20,612


Provision for loan losses


(1,218)



-



-



-



14,803


Non-interest income


4,879



13,087



4,142



4,695



3,977


Non-interest expense excluding
   amortization of intangible assets


18,363



25,218



23,705



23,894



33,394


Amortization of intangible assets


-



-



-



238



283


Income(loss) before income taxes


3,109



3,060



(2,537)



(516)



(23,891)


Income tax expense


284



284



292



309



357


Net income(loss) available to common
   shareholders

$

2,825


$

2,776


$

(2,829)


$

(825)


$

(24,248)


Financial ratios:
















Return on average assets (1)


0.5

%


0.4

%


(0.4)

%


(0.1)

%


(3.3)

%

Return on average equity (1)


5.0

%


4.4

%


(4.5)

%


(1.4)

%


(38.2)

%

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


5.3

%


5.2

%


(5.4)

%


(1.6)

%


(45.0)

%

Net interest margin (1)


2.79

%


2.57

%


2.67

%


2.87

%


3.03

%

Efficiency ratio


91

%


89

%


112

%


95

%


137

%

Per share data:
















Income(loss) per common share:
















Basic(3)

$

0.15


$

0.15


$

(0.15)


$

(0.05)


$

(1.39)


Diluted(3)

$

0.15


$

0.15


$

(0.15)


$

(0.05)


$

(1.39)


Book value(3)

$

13.55


$

13.39


$

13.18


$

13.29


$

13.06


Tangible book value(3)

$

11.51


$

11.34


$

11.13


$

11.24


$

10.85


Average basic shares(3)

18,632,526


18,616,537


18,589,717


17,417,829


17,348,169


Average diluted shares(3)

18,684,597


18,639,501


18,589,717


17,417,829


17,348,169


Non-interest income:
















Deposit service charges and fees

$

1,849


$

2,004


$

2,383


$

2,541


$

2,463


Interchange fees


554



544



540



624



629


Mortgage banking revenue, net


-



-



29



423



529


Gain on sale of loans


1,226



-



-



-



-


Net gain on sale of bank branches


-



9,235



-



-



-


Investment products income


488



589



480



635



715


BOLI income


503



512



482



484



469


Other income


259



203



228



(42)



(828)


        Total non-interest income

$

4,879


$

13,087


$

4,142


$

4,695


$

3,977


Non-interest expense:
















Salaries and employee benefits

$

9,120


$

10,590


$

9,412


$

11,818


$

16,803


    Occupancy expense


3,034



4,967



5,432



2,980



3,552


    Equipment expense


1,500



3,514



1,487



1,695



2,356


    Data processing expense


1,304



1,308



1,202



1,299



1,281


    Professional fees


711



836



1,225



1,423



2,353


    Insurance expense


1,094



1,247



1,299



1,443



1,358


    Advertising expense


223



235



386



567



523


    Problem loan expense


38



988



547



294



566


    Other expense


1,339



1,533



2,715



2,613



4,885


       Total non-interest expense

$

18,363


$

25,218


$

23,705


$

24,132


$

33,677


(1) Amounts are annualized.

(2) Return on average tangible equity is computed by dividing annualized net income for the period by average tangible equity. Average tangible

equity equals average equity less average identifiable intangible assets and goodwill.

(3) Prior periods were retroactively adjusted for the impact of the 1-for-5 reverse stock split completed on August 11, 2014.

 

SUN BANCORP, INC. AND SUBSIDIARIES



AVERAGE BALANCE SHEETS (Unaudited)


(Dollars in thousands)








 For the Three Months Ended June 30,




2015



2014




Average


Income/


Yield/



Average


Income/


Yield/




Balance


Expense


Cost



Balance


Expense


Cost



Interest-earning assets:















Loans receivable (1),(2):















Commercial and industrial

$

1,095,202


$

11,285



4.12

%


$

1,480,491


$

15,385



4.16

%


Home equity


161,698



1,685



4.17




185,710



1,777



3.83



Residential real estate


271,585



2,443



3.60




338,028



3,187



3.77



Other


2,122



39



7.35




47,554



717



6.03



Total loans receivable


1,530,607



15,452



4.04




2,051,783



21,066



4.11



Investment securities(3)


370,469



2,300



2.48




451,477



2,723



2.41



Interest-earning bank balances


329,218



208



0.25




243,052



154



0.25



Total interest-earning assets


2,230,294



17,960



3.22




2,746,312



23,943



3.49



Non-interest earning assets:





















  Cash and due from banks


34,014










67,196









  Bank properties and equipment, net


36,328










47,586









  Goodwill and intangible assets, net


38,188










38,568









  Other assets


80,696










82,765









Total non-interest-earning assets


189,226










236,115









Total assets

$

2,419,520









$

2,982,427






























Interest-bearing liabilities:





















Interest-bearing deposit accounts:





















Interest-bearing demand deposits

$

793,954


$

345



0.17

%


$

1,099,385


$

790



0.29

%


Savings deposits


222,372



108



0.19




264,386



177



0.27



Time deposits


418,703



884



0.84




582,840



1,223



0.84



Total interest-bearing deposit
   accounts


1,435,029



1,337



0.37




1,946,611



2,190



0.45



Short-term borrowings:





















Fed Funds Purchased


-



-



-




-



-



-



Securities sold under agreements to
    repurchase - customers


29



-



-




598



-



0.09



Long-term borrowings:





















FHLBNY advances (4)


82,416



418



2.03




60,887



315



2.07



Obligations under capital lease


6,916



118



6.82




7,221



127



7.04



Junior subordinated debentures


92,786



545



2.35




92,786



533



2.30



Total borrowings


182,147



1,081



2.37




161,492



975



2.41



Total interest-bearing liabilities


1,617,176



2,418



0.60




2,108,103



3,165



0.60



Non-interest bearing liabilities:





















  Non-interest-bearing demand deposits


521,563










573,290








  Other liabilities


28,392










46,918









Total non-interest bearing liabilities


549,955










620,208









Total liabilities


2,167,131










2,728,311









Shareholders' equity 


252,391










254,116









Total liabilities and shareholders'
    equity

$

2,419,522









$

2,982,427






























Net interest income




$

15,543









$

20,778






Interest rate spread (5)








2.62

%









2.89

%


Net interest margin (6)








2.79

%









3.03

%


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








138

%









130

%





(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, 2015 and 2014 were $167 thousand and $166 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,




2015



2014




Average


Income/


Yield/



Average


Income/


Yield/




Balance


Expense


Cost



Balance


Expense


Cost



Interest-earning assets:















Loans receivable (1),(2):















Commercial

$

1,073,526


$

22,089



4.12

%


$

1,520,246



31,735



4.17

%


Home equity


172,664



3,533



4.09




210,986



4,222



4.00



Residential real estate


277,856



4,842



3.49




334,749



6,145



3.67



Other


2,675



84



6.28




24,100



814



6.76



Total loans receivable


1,526,721



30,548



4.00




2,090,081



42,916



4.11



Investment securities(3)


381,494



4,729



2.48




454,590



5,541



2.44



Interest-earning bank balances


401,702



505



0.25




231,645



292



0.25



Total interest-earning assets


2,309,917



35,782



3.10




2,776,316



48,749



3.51



Non-interest earning assets:





















  Cash and due from banks


33,867










41,269









  Restricted cash


6,464










26,000









  Bank properties and equipment, net


39,465










48,093









  Goodwill and intangible assets, net


38,188










38,709









  Other assets


81,476










85,303









Total non-interest-earning assets


199,460










239,374









Total assets

$

2,509,377









$

3,015,690






























Interest-bearing liabilities:





















Interest-bearing deposit accounts:





















Interest-bearing demand deposits

$

844,124


$

751



0.18

%


$

1,124,284



1,597



0.28

%


Savings deposits


230,865



235



0.20




265,837



357



0.27



Time deposits


443,238



1,857



0.84




595,459



2,515



0.84



Total interest-bearing deposit
    accounts


1,518,227



2,843



0.37




1,985,580



4,469



0.45



Short-term borrowings:





















Securities sold under agreements to
    repurchase - customers


101



-



-




502



-



-



Long-term borrowings:





















FHLBNY advances (4)


71,647



728



2.03




60,908



628



2.06



Obligations under capital lease


6,955



238



6.84




7,257



250



6.89



Junior subordinated debentures


92,786



1,077



2.32




92,786



1,065



2.30



Total borrowings


171,489



2,043



2.38




161,453



1,943



2.41



Total interest-bearing liabilities


1,689,716



4,886



0.58




2,147,033



6,412



0.60



Non-interest bearing liabilities:





















  Non-interest-bearing demand deposits


540,572










566,486








  Other liabilities


27,902










49,631









Total non-interest bearing liabilities


568,474










616,117









Total liabilities


2,258,190










2,763,150









Shareholders' equity 


251,187










252,540









Total liabilities and shareholders'
   equity

$

2,509,377









$

3,015,690






























Net interest income




$

30,896









$

42,337






Interest rate spread (5)








2.52

%









2.91

%


Net interest margin (6)








2.68

%









3.05

%


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








137

%









129

%





(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, 2015 and 2014 were $330 thousand and $333 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, 2015



March 31, 2015



Average


Income/


Yield/



Average


Income/


Yield/



Balance


Expense


Cost



Balance


Expense


Cost


Interest-earning assets:














Loans receivable (1),(2):














Commercial and industrial

$

1,095,202


$

11,285



4.12

%


$

1,051,610


$

10,803



4.11

%

Home equity


161,698



1,685



4.17




183,753



1,848



4.02


Residential real estate


271,585



2,443



3.60




284,197



2,399



3.38


Other


2,122



39



7.35




3,233



47



5.82


Total loans receivable


1,530,607



15,452



4.04




1,522,793



15,097



3.97


Investment securities(3)


370,469



2,300



2.48




392,642



2,430



2.48


Interest-earning bank balances


329,218



208



0.25




474,991



297



0.25


Total interest-earning assets


2,230,294



17,960



3.22




2,390,426



17,824



2.98


Non-interest earning assets:




















  Cash and due from banks


34,014










46,718








  Bank properties and equipment, net


36,328










42,638








  Goodwill and intangible assets, net


38,188










38,188








  Other assets


80,696










82,261








Total non-interest-earning assets


189,226










209,805








Total assets

$

2,419,520









$

2,600,231




























Interest-bearing liabilities:




















Interest-bearing deposit accounts:




















Interest-bearing demand deposits

$

793,954


$

345



0.17

%


$

894,851


$

406



0.18

%

Savings deposits


222,372



108



0.19




239,452



127



0.21


Time deposits


418,703



884



0.84




468,046



973



0.83


Total interest-bearing deposit
    accounts


1,435,029



1,337



0.37




1,602,349



1,506



0.38


Short-term borrowings:




















Federal funds purchased


-



-



-




-



-



-


Securities sold under agreements to
    repurchase - customers


29



-



-




175



-



0.00


Long-term borrowings:




















FHLBNY advances (4)


82,416



418



2.03




60,758



310



2.04


Obligations under capital lease


6,916



118



6.82




6,994



120



6.86


Junior subordinated debentures


92,786



545



2.35




92,786



533



2.30


Total borrowings


182,147



1,081



2.37




160,713



963



2.40


Total interest-bearing liabilities


1,617,176



2,418



0.60




1,763,062



2,469



0.56


Non-interest bearing liabilities:




















  Non-interest-bearing demand deposits


521,563










559,793








  Other liabilities


28,392










27,406








Total non-interest bearing liabilities


549,955










587,199








Total liabilities


2,167,131










2,350,261








Shareholders' equity 


252,391










249,970








Total liabilities and shareholders'
    equity

$

2,419,522









$

2,600,231




























Net interest income




$

15,543









$

15,355





Interest rate spread (5)








2.62

%









2.42

%

Net interest margin (6)








2.79

%









2.57

%

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








138

%









136

%



(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, 2015 and March 31, 2015 were $167 thousand and $164 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.




 

To view the original version on PR Newswire, visit:http://www.prnewswire.com/news-releases/sun-bancorp-inc-reports-2q-2015-net-income-of-28-million-or-015-per-share-improvement-in-loan-growth-capital-ratios-and-expense-management-300118803.html

SOURCE Sun Bancorp, Inc.

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