VINELAND, N.J., April 14, 2008 (PRIME NEWSWIRE) -- Sun Bancorp, Inc. (Nasdaq:SNBC) reported net income of $4.2 million, or $0.19 per share diluted, for the quarter ended March 31, 2008, compared to net income of $4.7 million, or $0.21 per share diluted, for the first quarter of 2007 and $3.9 million, or $0.17 per share diluted, for the linked fourth quarter of 2007. Net income for the first quarter 2007 included a net charge of approximately $874,000 (pre-tax), or $0.02 per share. The net charge was a result of severance and other related expenses of approximately $2.3 million (pre-tax), or $0.07 per share, offset by a net gain realized from the sale of three branches during the quarter of $1.4 million (pre-tax), or $0.05 per share.
"Net income for the first quarter was higher than the fourth quarter of 2007, albeit due to a lower loan loss provision. We hope to build a trend of sequentially improved results as we move through this year," said Thomas X. Geisel, president and chief executive officer. "In the current banking environment, our main priority is to maintain a vigilant watch over credit quality in our existing loan portfolios, while continuing to fill the loan pipelines with carefully selected new credits that will provide a trouble-free and profitable revenue stream. Everyone at Sun Bancorp clearly understands that executing well on these fundamental objectives will drive our performance in 2008."
"On the deposit side, we have had some recent success as a result of our merger disruption campaign targeted at our competitors, but the competition for gathering rationally priced core deposits is as tough as ever and our net interest margin will reflect this," said Geisel. "Capital adequacy and capital deployment are key industry issues now. The Company's capital strength is quite good, as evidenced by a tangible capital ratio of 6.66%. While we intend to continue to buy back our stock as prudent opportunities arise, we expect to do so in less volume (61,400 shares were repurchased during the first quarter 2008) in order to maintain our focus on capital preservation and growth."
The following is an overview of the key financial highlights for the quarter:
-- Total assets were $3.366 billion at March 31, 2008, compared to $3.338 billion at December 31, 2007 and $3.327 billion at March 31, 2007. -- Total loans before allowance for loan losses were $2.551 billion at March 31, 2008, an increase of $135.1 million, or 5.6%, over March 31, 2007, and an increase of $41.0 million, or 1.6%, over December 31, 2007. -- Total non-performing assets were $30.7 million at March 31, 2008, or 1.20% of total loans and real estate owned, compared to $29.6 million, or 1.18%, at December 31, 2007 and $15.3 million, or 0.63%, at March 31, 2007. Net charge-offs for the quarter were $1.2 million and the loan loss provision was $2.1 million, or 0.05% and 0.08% of average loans outstanding, respectively. Net charge-offs and the loan loss provision as a percentage of average loans outstanding were 0.02% and 0.03% for March 31, 2007 and 0.19% and 0.22% for December 31, 2007, respectively. The allowance for loan losses to total loans is 1.09% at March 31, 2008, compared to 1.08% at March 31, 2007 and December 31, 2007. The allowance for loan losses to non-performing loans was 102.60% at March 31, 2008, compared to 177.14% at March 31, 2007 and 95.77% at December 31, 2007. -- Total deposits were $2.714 billion at March 31, 2008, an increase of $19.5 million, or 0.7%, over deposits at March 31, 2007. Total deposits increased approximately 0.5% over the linked quarter. The Company continues to rely on deposits as its primary funding source. However, in continued efforts to balance deposit growth and net interest margin, especially under the current interest rate environment and highly competitive local deposit pricing, the Company anticipates that other funding sources may be more cost efficient. -- Net interest income (tax-equivalent basis) of $25.1 million for the quarter compares to $24.7 million for the comparable prior year period and $25.9 million for the linked fourth quarter 2007. Net interest margin for the quarter of 3.35% compares to 3.34% for the comparable prior year period and 3.47% for the linked fourth quarter 2007. The margin compression for the current quarter primarily reflects the Federal Reserve's interest rate reductions which totaled 200 basis points during the quarter. These reductions caused interest-earning assets to re-price downward faster than interest-bearing liabilities. The Company expects that any further Fed rate reductions may cause further margin compression. Assuming no further rate reductions, the Company expects net interest margin to increase over the balance of the year with the rollover of the short-term certificates of deposit portfolio. -- Total operating non-interest income for the quarter of $7.2 million increased $1.6 million, or 28.9%, over the comparable prior year period and increased $364,000, or 5.3%, over the linked fourth quarter 2007. The increase over the prior year was primarily attributable to increases in service charges on deposit accounts of $264,000, an increase in net gain on derivative instruments of $405,000, an increase in BOLI income of $337,000 and an increase of $584,000 in Sun Financial Services revenue earned on investment products provided by a third-party broker-dealer. The increase in operating non-interest income over the linked quarter was primarily attributable to an increase of $505,000 in Sun Financial Services revenue earned on investment products provided by a third-party broker-dealer and a net gain on derivative instruments of $128,000. The increase in investment products revenue during the current quarter in comparison to the comparable prior year period and linked quarter was primarily attributable to the internalization of the Company's investment products sales force, which previously operated under an agreement with the independent third-party broker-dealer. In addition, BOLI income over the linked quarter decreased $185,000 as the Company realized a BOLI restructuring benefit of $301,000 in the previous quarter. The Company also realized a gain of $207,000 during the current quarter from the mandatory redemption of its Class B Visa shares in conjunction with Visa's initial public offering on March 19, 2008. -- Total operating non-interest expense for the quarter of $23.6 million increased $2.4 million, or 11.2%, over the comparable prior year period and increased $2.1 million, or 9.8%, over the linked fourth quarter 2007. While the current employee count has remained essentially flat over the last 12 months, salaries and benefits increased $1.5 million over the comparable prior year period. The increase in salaries and benefits includes an increase in salaries of $658,000, an increase in sales commissions of $601,000, an increase in stock compensation expense of $178,000 and an increase in employer payroll taxes of $109,000. The increase in sales commission during the current quarter was primarily attributable to the internalization of the Company's investment products sales force which previously operated under an agreement with the independent third-party broker-dealer. The other increases over the comparable prior year period include an increase in FDIC insurance of $396,000, an increase in professional fees of $78,000, an increase in advertising expense of $226,000 and an increase in problem loan costs of $123,000. The current quarter increase in total operating non-interest expense over the linked quarter is impacted by an expense reduction of $545,000 in the Company's reserve for unfunded loan commitments recognized in the fourth quarter 2007. The increases over the linked quarter represent an increase in salaries and benefits of $1.2 million, which includes an increase in salaries of $441,000, an increase in sales commissions of $307,000, an increase in stock compensation expense of $87,000 and an increase in first quarter employer payroll taxes of $457,000. The other noteworthy increases are primarily increased professional fees of $238,000, increased advertising expense of $240,000 and an increase in problem loan costs of $109,000.
The Company will hold its regularly scheduled conference call on Tuesday, April 15, 2008, at 1:30 p.m. (ET). Participants may listen to the live Web cast through the Sun Bancorp Web site at www.sunnb.com. Participants are advised to log on 10 minutes ahead of the scheduled start of the call. An Internet-based replay also will be available at the Web site for two weeks following the call.
Sun Bancorp, Inc. is a multi-state bank holding company headquartered in Vineland, New Jersey. Its primary subsidiary is Sun National Bank, serving customers through nearly 70 branch locations in New Jersey and New Castle County, Delaware. The 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.sunnb.com.
The foregoing material contains forward-looking statements concerning the financial condition, results of operations and business of the Company. We caution that such statements are subject to a number of uncertainties and actual results could differ materially, and, 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.
SUN BANCORP, INC. AND SUBSIDIARIES FINANCIAL HIGHLIGHTS (unaudited) (Dollars in thousands, except per share data) For the Three Months Ended ----------------------------------- March 31, December 31, ---------------------- 2008 2007 2007 --------------------------------------------------------------------- Profitability for the period: Net interest income $ 24,663 $ 24,333 $ 25,498 Provision for loan losses 2,133 750 5,443 Non-interest income 7,375 7,017 6,822 Non-interest expense 23,965 23,571 21,528 Income before income taxes 5,940 7,029 5,349 Net income $ 4,183 $ 4,685 $ 3,870 ===================================================================== Financial ratios: Return on average assets(1) 0.50% 0.57% 0.47% Return on average equity(1) 4.57% 5.44% 4.26% Return on average tangible equity(1),(2) 7.77% 9.93% 7.33% Net interest margin(1) 3.35% 3.34% 3.47% Efficiency ratio 74.80% 75.19% 66.61% Efficiency ratio, excluding non-operating income and non-operating expense(3) 74.28% 71.07% 66.61% Earnings per common share(4): Basic $ 0.19 $ 0.22 $ 0.18 Diluted $ 0.19 $ 0.21 $ 0.17 Average equity to average assets 11.02% 10.44% 10.93% March 31, December 31, ---------------------- 2008 2007 2007 --------------------------------------------------------------------- At period-end: Total assets $3,366,105 $3,326,681 $3,338,392 Total deposits 2,713,756 2,694,304 2,699,091 Loans receivable, net of allowance for loan losses 2,523,058 2,389,842 2,482,917 Investments 451,727 502,592 461,639 Borrowings 160,366 149,799 154,213 Junior subordinated debentures 92,786 108,250 97,941 Shareholders' equity 364,242 348,595 362,177 Credit quality and capital ratios: Allowance for loan losses to total gross loans 1.09% 1.08% 1.08% Non-performing assets to total gross loans and real estate owned 1.20% 0.63% 1.18% Allowance for loan losses to non-performing loans 102.60% 177.14% 95.77% Total capital (to risk- weighted assets)(5): Sun Bancorp, Inc. 11.71% 11.98% 11.82% Sun National Bank 10.83% 10.64% 11.06% Tier 1 capital (to risk- weighted assets)(5): Sun Bancorp, Inc. 10.72% 11.00% 10.86% Sun National Bank 9.84% 9.66% 10.09% Leverage ratio(5): Sun Bancorp, Inc. 9.67% 9.58% 9.67% Sun National Bank 8.87% 8.42% 9.00% Book value $ 16.80 $ 16.16 $ 16.68 Tangible book value $ 9.88 $ 8.98 $ 9.71 (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) Efficiency ratio, excluding non-operating income and non-operating expenses, is computed by dividing non-interest expense for the period by the summation of net interest income and non-interest income. Non-interest income for the three months ended March 31, 2008 excludes a gain on the mandatory redemption of Visa stock of $207,000 as compared to the exclusion of a net gain of $1.4 million from the sale of branches for the same period in 2007. Non-interest expense for the three months ended March 31, 2008 excludes a $250,000 executive sign-on incentive and $72,000 in lease buyout charges as compared to the exclusion of $2.3 million in severance related expenses for the same period in 2007. (4) Data is adjusted for a 5% stock dividend declared in April 2007. (5) March 31, 2008 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) March 31, December 31, 2008 2007 --------------------------------------------------------------------- ASSETS Cash and due from banks $ 80,962 $ 81,479 Interest-earning bank balances 1,944 2,380 Federal funds sold 187 2,654 --------------------------------------------------------------------- Cash and cash equivalents 83,093 86,513 Investment securities available for sale (amortized cost - $421,635 and $427,378 at March 31, 2008 and December 31, 2007, respectively) 416,969 425,805 Investment securities held to maturity (estimated fair value - $17,768 and $18,755 at March 31, 2008 and December 31, 2007, respectively) 17,698 18,965 Loans receivable (net of allowance for loan losses - $27,904 and $27,002 at March 31, 2008 and December 31, 2007, respectively) 2,523,058 2,482,917 Restricted equity investments 17,060 16,869 Bank properties and equipment, net 48,141 48,118 Real estate owned, net 3,476 1,449 Accrued interest receivable 13,365 15,018 Goodwill 127,894 127,894 Intangible assets, net 22,301 23,479 Deferred taxes, net 4,260 3,169 Bank owned life insurance 73,293 72,487 Other assets 15,497 15,709 --------------------------------------------------------------------- Total assets $3,366,105 $3,338,392 ===================================================================== LIABILITIES & SHAREHOLDERS' EQUITY LIABILITIES Deposits $2,713,756 $2,699,091 Federal funds purchased 36,000 30,000 Securities sold under agreements to repurchase - customers 36,938 40,472 Advances from the Federal Home Loan Bank (FHLB) 67,187 63,483 Securities sold under agreements to repurchase - FHLB 15,000 15,000 Obligation under capital lease 5,241 5,258 Junior subordinated debentures 92,786 97,941 Other liabilities 34,955 24,970 --------------------------------------------------------------------- Total liabilities 3,001,863 2,976,215 --------------------------------------------------------------------- SHAREHOLDERS' EQUITY Preferred stock, $1 par value, 1,000,000 shares authorized, none issued -- -- Common stock, $1 par value, 50,000,000 shares authorized; 22,747,247 shares issued and 21,675,324 shares outstanding at March 31, 2008; 22,722,655 shares issued and 21,712,132 shares outstanding at December 31, 2007 22,747 22,723 Additional paid-in capital 337,321 336,668 Retained earnings 24,521 20,338 Accumulated other comprehensive loss (3,040) (1,027) Treasury stock at cost, 1,071,923 shares and 1,010,523 shares at March 31, 2008 and December 31, 2007, respectively (17,307) (16,525) --------------------------------------------------------------------- Total shareholders' equity 364,242 362,177 --------------------------------------------------------------------- Total liabilities and shareholders' equity $3,366,105 $3,338,392 ===================================================================== SUN BANCORP, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF INCOME (unaudited) (Dollars in thousands, except per share data) For the Three Months Ended March 31, ------------------ 2008 2007 --------------------------------------------------------------------- INTEREST INCOME Interest and fees on loans $40,395 $43,111 Interest on taxable investment securities 4,183 4,534 Interest on non-taxable investment securities 761 658 Dividends on restricted equity investments 269 266 Interest on federal funds sold 31 522 --------------------------------------------------------------------- Total interest income 45,639 49,091 --------------------------------------------------------------------- INTEREST EXPENSE Interest on deposits 18,313 20,834 Interest on borrowed funds 1,119 1,771 Interest on junior subordinated debentures 1,544 2,153 --------------------------------------------------------------------- Total interest expense 20,976 24,758 --------------------------------------------------------------------- Net interest income 24,663 24,333 PROVISION FOR LOAN LOSSES 2,133 750 --------------------------------------------------------------------- Net interest income after provision for loan losses 22,530 23,583 --------------------------------------------------------------------- NON-INTEREST INCOME Service charges on deposit accounts 3,393 3,129 Other service charges 78 72 Net gain on sale of branches -- 1,443 Net gain on sale of loans 424 508 Net gain on derivative instruments 639 234 Other 2,841 1,631 --------------------------------------------------------------------- Total non-interest income 7,375 7,017 --------------------------------------------------------------------- NON-INTEREST EXPENSE Salaries and employee benefits 12,420 12,589 Occupancy expense 3,042 3,012 Equipment expense 1,624 1,951 Amortization of intangible assets 1,177 1,182 Data processing expense 1,120 1,008 Professional fees 565 811 Insurance expense 669 258 Advertising expense 699 473 Other 2,649 2,287 --------------------------------------------------------------------- Total non-interest expense 23,965 23,571 --------------------------------------------------------------------- INCOME BEFORE INCOME TAXES 5,940 7,029 INCOME TAXES 1,757 2,344 --------------------------------------------------------------------- NET INCOME $ 4,183 $ 4,685 ===================================================================== Basic earnings per share(1) $ 0.19 $ 0.22 ===================================================================== Diluted earnings per share(1) $ 0.19 $ 0.21 ===================================================================== (1) Data is adjusted for a 5% stock dividend declared in April 2007. SUN BANCORP, INC. AND SUBSIDIARIES HISTORICAL TRENDS IN QUARTERLY FINANCIAL DATA (unaudited) (Dollars in thousands) 2008 2007 2007 Q1 Q4 Q3 ------------------------------------------------------------------- Balance sheet at quarter end: Loans: Commercial and industrial $2,061,640 $2,024,728 $1,990,027 Home equity 267,023 264,965 258,991 Second mortgage 81,090 81,063 79,464 Residential real estate 53,616 49,750 54,601 Other 87,593 89,413 91,094 ------------------------------------------------------------------- Total gross loans 2,550,962 2,509,919 2,474,177 Allowance for loan losses (27,904) (27,002) (26,340) ------------------------------------------------------------------- Net loans 2,523,058 2,482,917 2,447,837 Goodwill 127,894 127,894 127,935 Intangible assets, net 22,301 23,479 24,656 Total assets 3,366,105 3,338,392 3,295,576 Total deposits 2,713,756 2,699,091 2,682,286 Federal funds purchased 36,000 30,000 -- Securities sold under agreements to repurchase - customers 36,938 40,472 46,499 Advances from the Federal Home Loan Bank (FHLB) 67,187 63,483 64,763 Securities sold under agreements to repurchase - FHLB 15,000 15,000 15,000 Obligation under capital lease 5,241 5,258 5,275 Junior subordinated debentures 92,786 97,941 97,941 Total shareholders' equity 364,242 362,177 361,645 Quarterly average balance sheet: Loans: Commercial and industrial $2,037,548 $2,030,928 $1,981,778 Home equity 267,836 263,245 250,474 Second mortgage 80,819 80,400 78,643 Residential real estate 50,012 50,734 49,635 Other 86,602 87,155 89,566 ------------------------------------------------------------------- Total gross loans 2,522,817 2,512,462 2,450,096 Securities and other interest-earning assets 469,322 468,418 509,016 Total interest-earning assets 2,992,139 2,980,880 2,959,112 Total assets 3,326,061 3,322,686 3,292,687 Non-interest-bearing demand deposits 416,612 434,066 462,173 Total deposits 2,701,630 2,689,326 2,682,879 Total interest-bearing liabilities 2,509,725 2,499,003 2,445,187 Total shareholders' equity 366,400 363,302 359,949 Capital and credit quality measures: Total capital (to risk-weighted assets)(1): Sun Bancorp, Inc. 11.71% 11.82% 11.97% Sun National Bank 10.83% 11.06% 11.06% Tier I capital (to risk-weighted assets)(1): Sun Bancorp, Inc. 10.72% 10.86% 10.99% Sun National Bank 9.84% 10.09% 10.05% Leverage ratio(1): Sun Bancorp, Inc. 9.67% 9.67% 9.80% Sun National Bank 8.87% 9.00% 8.95% Average equity to average assets 11.02% 10.93% 10.93% Allowance for loan losses to total gross loans 1.09% 1.08% 1.06% Non-performing assets to total gross loans and real estate owned 1.20% 1.18% 0.90% Allowance for loan losses to non-performing loans 102.60% 95.77% 127.11% Other data: Net charge-offs $ (1,231) $ (4,781) $ (999) =================================================================== Non-performing assets: Non-accrual loans $ 26,567 $ 26,853 $ 18,157 Loans past due 90 days and accruing 631 1,343 2,565 Real estate owned, net 3,476 1,449 1,449 ------------------------------------------------------------------- Total non-performing assets $ 30,674 $ 29,645 $ 22,171 =================================================================== 2007 2007 Q2 Q1 ----------------------------------------------------- Balance sheet at quarter end: Loans: Commercial and industrial $ 1,985,584 $ 1,972,491 Home equity 245,283 234,982 Second mortgage 79,120 76,449 Residential real estate 47,101 38,798 Other 91,618 93,149 ----------------------------------------------------- Total gross loans 2,448,706 2,415,869 Allowance for loan losses (26,079) (26,027) ----------------------------------------------------- Net loans 2,422,627 2,389,842 Goodwill 127,936 127,936 Intangible assets, net 25,833 27,011 Total assets 3,324,633 3,326,681 Total deposits 2,725,747 2,694,304 Federal funds purchased -- 1,500 Securities sold under agreements to repurchase - customers 44,612 42,511 Advances from the Federal Home Loan Bank (FHLB) 66,029 100,481 Securities sold under agreements to repurchase - FHLB -- -- Obligation under capital lease 5,291 5,307 Junior subordinated debentures 97,941 108,250 Total shareholders' equity 355,758 348,595 Quarterly average balance sheet: Loans: Commercial and industrial $ 1,978,175 $ 1,956,190 Home equity 240,150 233,837 Second mortgage 77,442 76,167 Residential real estate 39,193 37,710 Other 91,578 92,705 ----------------------------------------------------- Total gross loans 2,426,538 2,396,609 Securities and other interest-earning assets 577,669 560,574 Total interest-earning assets 3,004,207 2,957,183 Total assets 3,341,506 3,302,913 Non-interest-bearing demand deposits 458,851 458,201 Total deposits 2,724,554 2,664,668 Total interest-bearing liabilities 2,501,896 2,466,678 Total shareholders' equity 353,280 344,717 Capital and credit quality measures: Total capital (to risk-weighted assets)(1): Sun Bancorp, Inc. 11.80% 11.98% Sun National Bank 10.74% 10.64% Tier I capital (to risk-weighted assets)(1): Sun Bancorp, Inc. 10.83% 11.00% Sun National Bank 9.77% 9.66% Leverage ratio(1): Sun Bancorp, Inc. 9.46% 9.58% Sun National Bank 8.54% 8.42% Average equity to average assets 10.57% 10.44% Allowance for loan losses to total gross loans 1.07% 1.08% Non-performing assets to total gross loans and real estate owned 0.67% 0.63% Allowance for loan losses to non-performing loans 169.98% 177.14% Other data: Net charge-offs $ (898) $ (381) ===================================================== Non-performing assets: Non-accrual loans $ 14,505 $ 14,147 Loans past due 90 days and accruing 837 546 Real estate owned, net 1,165 600 ----------------------------------------------------- Total non-performing assets $ 16,507 $ 15,293 ===================================================== (1) March 31, 2008 capital ratios are estimated, subject to regulatory filings. SUN BANCORP, INC. AND SUBSIDIARIES HISTORICAL TRENDS IN QUARTERLY FINANCIAL DATA (unaudited) (Dollars in thousands, except per share data) 2008 2007 2007 Q1 Q4 Q3 --------------------------------------------------------------------- Profitability for the quarter: Tax-equivalent interest income $ 46,049 $ 49,443 $ 50,406 Interest expense 20,976 23,554 24,567 Tax-equivalent net interest income 25,073 25,889 25,839 Tax-equivalent adjustment 410 391 384 Provision for loan losses 2,133 5,443 1,260 Non-interest income, excluding net gain on sale of branches and gain on sale of bank property and equipment 7,375 6,822 6,011 Net gain on sale of branches -- -- -- Gain on sale of bank property & equipment -- -- -- Non-interest expense, excluding amortization of intangible assets 22,788 20,351 20,669 Amortization of intangible assets 1,177 1,177 1,177 Income before income taxes 5,940 5,349 8,360 Income tax expense 1,757 1,479 2,475 Net income $ 4,183 $ 3,870 $ 5,885 ===================================================================== Financial ratios: Return on average assets(1) 0.50% 0.47% 0.71% Return on average equity(1) 4.57% 4.26% 6.54% Return on average tangible equity (1),(2) 7.77% 7.33% 11.39% Net interest margin(1) 3.35% 3.47% 3.49% Efficiency ratio 74.80% 66.61% 69.43% Efficiency ratio, excluding non-operating income and non-operating expense 74.28% 66.61% 68.30% Per share data: Earnings per common share(3): Basic $ 0.19 $ 0.18 $ 0.27 Diluted $ 0.19 $ 0.17 $ 0.26 Book value $ 16.80 $ 16.68 $ 16.48 Tangible book value $ 9.88 $ 9.71 $ 9.53 Average basic shares 21,701,191 21,825,667 22,045,407 Average diluted shares 22,158,926 22,435,324 22,735,620 Operating non-interest income: Service charges on deposit accounts $ 3,393 $ 3,421 $ 3,585 Other service charges 78 85 75 Gain on sale of loans 424 342 392 Net gain on derivative instruments 639 511 297 Other 2,634 2,463 1,662 --------------------------------------------------------------------- Total operating non-interest income 7,168 6,822 6,011 --------------------------------------------------------------------- Non-operating income(4): Gain on Visa stock redemption 207 -- -- Net gain on sale of branches -- -- -- Gain on sale of bank property & equipment -- -- -- --------------------------------------------------------------------- Total non-operating income 207 -- -- --------------------------------------------------------------------- Total non-interest income $ 7,375 $ 6,822 $ 6,011 ===================================================================== Operating non- interest expense: Salaries and employee benefits $ 12,170 $ 11,004 $ 10,816 Occupancy expense 2,970 2,830 2,773 Equipment expense 1,624 1,660 1,732 Amortization of intangible assets 1,177 1,177 1,177 Data processing expense 1,120 1,078 1,063 Professional fees 565 327 406 Insurance expense 669 695 644 Advertising expense 699 459 415 Other expenses 2,649 2,298 2,635 --------------------------------------------------------------------- Total operating non-interest expense 23,643 21,528 21,661 --------------------------------------------------------------------- Non-operating expense(4): Lease buy-out expenses and other branch rationalization charges 72 -- 185 Severance and other related expenses -- -- -- Executive sign-on incentive 250 -- -- Early extinguishment of borrowings -- -- -- --------------------------------------------------------------------- Total non-operating expense 322 -- 185 --------------------------------------------------------------------- Total non-interest expense $ 23,965 $ 21,528 $ 21,846 ===================================================================== 2007 2007 Q2 Q1 --------------------------------------------------------------------- Profitability for the quarter: Tax-equivalent interest income $ 50,049 $ 49,441 Interest expense 26,108 24,758 Tax-equivalent net interest income 23,941 24,683 Tax-equivalent adjustment 391 350 Provision for loan losses 950 750 Non-interest income, excluding net gain on sale of branches and gain on sale of bank property and equipment 6,293 5,574 Net gain on sale of branches -- 1,443 Gain on sale of bank property & equipment 12 -- Non-interest expense, excluding amortization of intangible assets 20,840 22,389 Amortization of intangible assets 1,178 1,182 Income before income taxes 6,887 7,029 Income tax expense 1,975 2,344 Net income $ 4,912 $ 4,685 =================================================================== Financial ratios: Return on average assets(1) 0.59% 0.57% Return on average equity(1) 5.56% 5.44% Return on average tangible equity (1),(2) 9.88% 9.93% Net interest margin(1) 3.19% 3.34% Efficiency ratio 73.75% 75.19% Efficiency ratio, excluding non-operating income and non-operating expense 71.77% 71.07% Per share data: Earnings per common share(3): Basic $ 0.23 $ 0.22 Diluted $ 0.22 $ 0.21 Book value $ 16.21 $ 16.16 Tangible book value $ 9.21 $ 8.98 Average basic shares 21,738,367 21,547,912 Average diluted shares 22,670,769 22,596,591 Operating non-interest income: Service charges on deposit accounts $ 3,552 $ 3,129 Other service charges 75 72 Gain on sale of loans 447 508 Net gain on derivative instruments 525 234 Other 1,694 1,631 ------------------------------------------------------------------- Total operating non-interest income 6,293 5,574 ------------------------------------------------------------------- Non-operating income(4): Gain on Visa stock redemption -- -- Net gain on sale of branches -- 1,443 Gain on sale of bank property & equipment 12 -- ------------------------------------------------------------------- Total non-operating income 12 1,443 ------------------------------------------------------------------- Total non-interest income $ 6,305 $ 7,017 =================================================================== Operating non- interest expense: Salaries and employee benefits $ 10,937 $ 10,626 Occupancy expense 2,717 3,012 Equipment expense 1,829 1,951 Amortization of intangible assets 1,178 1,182 Data processing expense 1,100 1,008 Professional fees 566 487 Insurance expense 522 258 Advertising expense 509 473 Other expenses 2,450 2,257 ------------------------------------------------------------------- Total operating non-interest expense 21,808 21,254 ------------------------------------------------------------------- Non-operating expense(4): Lease buy-out expenses and other branch rationalization charges -- -- Severance and other related expenses 86 2,317 Executive sign-on incentive -- -- Early extinguishment of borrowings 124 -- ------------------------------------------------------------------- Total non-operating expense 210 2,317 ------------------------------------------------------------------- Total non-interest expense $ 22,018 $ 23,571 =================================================================== (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) Data is adjusted for a 5% stock dividend declared in April 2007. (4) Amount consists of items which the Company believes are not a result of normal operations. SUN BANCORP, INC. AND SUBSIDIARIES AVERAGE BALANCE SHEETS (unaudited) (Dollars in thousands) For the Three Months Ended March 31, 2008 -------------------------------- Average Income/ Yield/ Balance Expense Cost --------------------------------------------------------------------- Interest-earning assets: Loans receivable(1),(2): Commercial and industrial $2,037,548 $32,506 6.38% Home equity 267,836 4,155 6.21 Second mortgage 80,819 1,318 6.52 Residential real estate 50,012 818 6.54 Other 86,602 1,598 7.38 ---------- ------- Total loans receivable 2,522,817 40,395 6.40 Investment securities(3) 455,366 5,536 4.86 Interest-earning bank balances 10,090 87 3.45 Federal funds sold 3,866 31 3.21 ---------- ------- Total interest-earning assets 2,992,139 46,049 6.16 ---------- ------- Cash and due from banks 56,555 Bank properties and equipment, net 47,891 Goodwill and intangible assets, net 150,923 Other assets 78,553 ---------- Total non-interest-earning assets 333,922 ---------- Total assets $3,326,061 ========== Interest-bearing liabilities: Interest-bearing deposit accounts: Interest-bearing demand deposits $ 754,432 3,319 1.76% Savings deposits 461,949 2,806 2.43 Time deposits 1,068,637 12,188 4.56 ---------- ------- Total interest-bearing deposit accounts 2,285,018 18,313 3.21 ---------- ------- Borrowed money: Federal funds purchased 13,791 113 3.28 Securities sold under agreements to repurchase - customers 38,700 233 2.41 FHLB advances(4) 73,843 677 3.67 Junior subordinated debentures 93,126 1,544 6.63 Obligation under capital lease 5,247 96 7.32 ---------- ------- Total borrowings 224,707 2,663 4.74 ---------- ------- Total interest-bearing liabilities 2,509,725 20,976 3.34 ---------- ------- Non-interest-bearing demand deposits 416,612 Other liabilities 33,324 ---------- Total non-interest-bearing liabilities 449,936 ---------- Total liabilities 2,959,661 Shareholders' equity 366,400 ---------- Total liabilities and shareholders' equity $3,326,061 ========== Net interest income $25,073 ======= Interest rate spread(5) 2.82% ======= Net interest margin(6) 3.35% ======= Ratio of average interest-earning assets to average interest-bearing liabilities 119.22% ======= For the Three Months Ended March 31, 2007 -------------------------------- Average Income/ Yield/ Balance Expense Cost --------------------------------------------------------------------- Interest-earning assets: Loans receivable(1),(2): Commercial and industrial $1,956,190 $35,504 7.26% Home equity 233,837 3,825 6.54 Second mortgage 76,167 1,190 6.25 Residential real estate 37,710 757 8.03 Other 92,705 1,835 7.92 ---------- ------- Total loans receivable 2,396,609 43,111 7.20 Investment securities(3) 502,341 5,572 4.44 Interest-earning bank balances 18,363 236 5.14 Federal funds sold 39,870 522 5.24 ---------- ------- Total interest-earning assets 2,957,183 49,441 6.69 ---------- ------- Cash and due from banks 72,646 Bank properties and equipment, net 42,402 Goodwill and intangible assets, net 155,910 Other assets 74,772 ---------- Total non-interest-earning assets 345,730 ---------- Total assets $3,302,913 ========== Interest-bearing liabilities: Interest-bearing deposit accounts: Interest-bearing demand deposits $ 761,056 5,935 3.12% Savings deposits 439,772 3,093 2.81 Time deposits 1,005,639 11,806 4.70 ---------- ------- Total interest-bearing deposit accounts 2,206,467 20,834 3.78 ---------- ------- Borrowed money: Federal funds purchased 33 -- -- Securities sold under agreements to repurchase - customers 45,328 528 4.66 FHLB advances(4) 101,288 1,146 4.53 Junior subordinated debentures 108,250 2,153 7.96 Obligation under capital lease 5,312 97 7.30 ---------- ------- Total borrowings 260,211 3,924 6.03 ---------- ------- Total interest-bearing liabilities 2,466,678 24,758 4.01 ---------- ------- Non-interest-bearing demand deposits 458,201 Other liabilities 33,317 ---------- Total non-interest-bearing liabilities 491,518 ---------- Total liabilities 2,958,196 Shareholders' equity 344,717 ---------- Total liabilities and shareholders' equity $3,302,913 ========== Net interest income $24,683 ======= Interest rate spread(5) 2.68% ======= Net interest margin(6) 3.34% ======= Ratio of average interest-earning assets to average interest-bearing liabilities 119.89% ======= (1) Average balances include non-accrual loans. (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. (4) Amounts include advances from FHLB and securities sold under agreements to repurchase - FHLB. (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.