VINELAND, N.J., Jan. 22, 2008 (PRIME NEWSWIRE) -- Sun Bancorp, Inc. (Nasdaq:SNBC) today reported net income of $3.9 million, or $.17 per share diluted, for the quarter ended December 31, 2007, compared to net income of $4.5 million, or $.20 per share diluted, for the fourth quarter of 2006. Net income for the fourth quarter 2006 includes pre-tax charges of approximately $1.1 million ($.03 per share) related to two branch consolidations and severance expense.
Net income for the year ended December 31, 2007 was $19.4 million, or $.86 per share diluted, compared to net income of $17.3 million, or $.77 per share diluted, for the prior year. The full-year 2007 results included net-charges of approximately $2.1 million (pre-tax), or $.06 per share. The net charges include $2.4 million of severance and other related expenses, a $915,000 write-off of unamortized issuance costs of redeemed trust preferred securities and early extinguishment of debt charges on FHLB borrowings, and $185,000 of branch consolidation charges. Offsetting these charges was a pre-tax gain of $1.4 million realized from the sale of three branches. The prior year included approximately $1.6 million (pre-tax), or $.05 per share, in branch rationalization and severance related charges.
"As we closed out 2007 with expectations that the difficult operating environment will continue indefinitely, credit quality is first and foremost on everyone's mind. Accordingly, during the quarter we charged off $4.8 million of delinquent loans and recorded a $5.4 million loan loss provision to maintain adequate reserve coverage (1.08%). These charge-offs and loan loss provision exceeded our previously announced levels. This positions us well for forward progress, when combined with favorable performance trends throughout 2007 for our net interest margin, non-interest income growth and expense control," said Thomas X. Geisel, president and chief executive officer of Sun Bancorp. "Our credit risk assessment process is being administered by a seasoned team and we are optimistic that we can maintain loan quality while the lenders produce respectable growth throughout the various segments of the portfolio."
"During 2007, market conditions enabled us to repurchase 1,010,523 shares of our outstanding common stock, thus completing in late December a plan that authorized the buyback of about 5%, or approximately 1,000,000 shares. Of the total, 467,545 shares were repurchased during the fourth quarter. The Board subsequently authorized a new stock repurchase plan covering up to approximately 5%, or approximately 1,100,000 additional shares, of common stock to be purchased in the open market or in privately negotiated transactions. We expect to continue to be an active purchaser of our stock as opportunities arise," said Geisel.
The following is an overview of the key financial highlights:
-- Total assets were $3.338 billion at December 31, 2007, compared to $3.296 billion at September 30, 2007 and $3.326 billion at December 31, 2006. -- Total loans before allowance for loan losses were $2.510 billion at December 31, 2007, an increase of $143.3 million, or 6.1% over total loans at December 31, 2006. Linked quarter loan growth normalized for prepayments of about $39.0 million during the quarter approximated 3.0%. Total loan growth over year end 2006 normalized for prepayments and a branch sale approximates 13.1%. -- Total non-performing assets were $29.6 million at December 31, 2007, or 1.18% of total loans and real estate owned, compared to $15.2 million, or .64% of total loans and real estate owned, at December 31, 2006. On a linked quarter basis, total non-performing assets increased $7.5 million. Net charge-offs for the quarter were $4.8 million and the loan loss provision for the quarter was $5.4 million. The allowance for loan losses to total loans is 1.08% at December 31, 2007, compared to 1.08% at December 31, 2006 and 1.06% at September 30, 2007. -- Total deposits were $2.699 billion at December 31, 2007, an increase of $31.1 million, or 1.2% over deposits at December 31, 2006. On average, total deposits increased 3.8% year-to-year. Total deposits increased approximately 1% over the linked quarter. -- Net interest income (tax-equivalent basis) of $26.2 million for the quarter compares to $24.8 million for the comparable prior year period and $25.8 million for the linked third quarter. The net interest margin for the quarter of 3.52% compares to 3.37% for the comparable prior year period and 3.49% for the linked third quarter. The linked quarter margin improvement reflects a net spread increase of 12 basis points. This increase is due to a decrease of 25 basis points in the cost of interest-bearing liabilities offset by a decrease in yield on earning assets of 13 basis points. -- Total operating non-interest income for the quarter of $6.5 million increased $1.1 million, or 21.3% over the comparable prior year period and increased $471,000, or 7.8% over the linked third quarter. The increase over the prior year period was attributable to increases in service charges on deposit accounts of $238,000, an increase in net gain on derivative instruments of $311,000 and an increase in BOLI income of $585,000. The increase over the linked quarter was primarily related to an increase in BOLI income of $506,000, an increase in gain on derivative instruments of $214,000 offset partially by a decrease in service charges on deposit accounts of $164,000. During the quarter, the Company completed a conversion of approximately $40.4 million of its existing general account BOLI to a new separate account policy. The net conversion cost for this transaction resulted in the recognition of $301,000 in BOLI income and $416,000 in federal income tax expense for the quarter. Total operating non-interest income for the year 2007 of $24.4 million increased $4.3 million, or 21.2% over 2006. The primary increases were related to an increase in service charges on deposit accounts of $2.6 million, an increase in gain on derivative instruments of $389,000, an increase in BOLI income of $684,000 and an increase in gain on sale of loans of $562,000. Total operating non-interest income for the year 2007 represents approximately 20.0% of total revenue compared to 2006 at approximately 17.0%. -- Total operating non-interest expenses for the quarter of $21.5 million increased $374,000, or 1.8% over the comparable prior year period. The primary increase is FDIC insurance expense which increased over the prior period by $392,000 due to the FDIC reform legislation effective for 2007. Total operating non-interest expense decreased approximately 1.0% over the linked third quarter. Total operating non-interest expenses for the year of $86.3 million decreased $1.9 million, or 2.2% over the prior year. The full year impact of increased FDIC insurance expense over the prior year was $971,000. The efficiency ratio for the quarter of 66.61% compares to the comparable prior year period efficiency ratio of 74.06%. The efficiency ratio has continued to trend favorably each quarter of 2007. The efficiency ratio for the year, excluding the non-operating income and expenses items previously noted, is 69.37% and compares to the prior year on the same basis, at 73.97%. This continues to reflect the Company's focus on ongoing profitability enhancement initiatives with particular emphasis on expense efficiency savings.
The Company will hold its regular quarterly conference call on Wednesday, January 23, 2008 at 9:30 a.m. (ET). Participants may call 1-800-391-2548 and give the verbal password: vi36443. The conference call also will be Web cast live through the Sun Bancorp Web site at www.sunnb.com. Participants are advised to call in or log on 10 minutes ahead of the scheduled start of the call. An Internet-based replay 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 70 branch locations in Southern and Central 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 For the Months Ended Years Ended December 31, December 31, ----------------- ----------------- 2007 2006 2007 2006 ------- ------- ------- ------- Profitability for the period: Net interest income $25,838 $24,545 $99,176 $99,078 Provision for loan losses 5,443 990 8,403 3,807 Non-interest income 6,482 5,012 25,815 19,746 Non-interest expense 21,528 21,889 88,963 89,393 Income before income taxes 5,349 6,678 27,625 25,624 Net income $ 3,870 $ 4,454 $19,352 $17,274 ======= ======= ======= ======= Financial ratios: Return on average assets (1) 0.47% 0.54% 0.58% 0.53% Return on average equity (1) 4.26% 5.24% 5.45% 5.28% Return on average tangible equity (1),(2) 7.33% 9.78% 9.61% 10.15% Net interest margin (1) 3.52% 3.37% 3.38% 3.44% Efficiency ratio 66.61% 74.06% 71.18% 75.23% Efficiency ratio, excluding non-operating income and non-operating expense (3) 66.61% 70.78% 69.37% 73.97% Earnings per common share (4): Basic $ 0.18 $ 0.21 $ 0.89 $ 0.81 Diluted $ 0.17 $ 0.20 $ 0.86 $ 0.77 Average equity to average assets 10.93% 10.34% 10.72% 10.09% December 31, --------------------------- 2007 2006 ---------- ---------- At period-end: Total assets $3,338,392 $3,325,563 Total deposits 2,699,091 2,667,997 Loans receivable, net of allowance for loan losses 2,482,917 2,340,965 Investments 461,639 525,122 Borrowings 154,213 160,622 Junior subordinated debentures 97,941 108,250 Shareholders' equity 362,177 342,227 Credit quality and capital ratios: Allowance for loan losses to gross loans 1.08% 1.08% Non-performing assets to gross loans and real estate owned 1.18% 0.64% Allowance for loan losses to non-performing loans 95.77% 175.50% Total capital (to risk- weighted assets) (5) Sun Bancorp, Inc. 11.93% 11.89% Sun National Bank 11.08% 10.57% Tier 1 capital (to risk- weighted assets) (5) Sun Bancorp, Inc. 10.95% 10.91% Sun National Bank 10.11% 9.59% Leverage ratio (5) Sun Bancorp, Inc. 9.67% 9.40% Sun National Bank 8.98% 8.28% Book value $ 16.68 $ 15.89 Tangible book value $ 9.71 $ 8.62 (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. Net interest income for the year ended December 31, 2007 excludes the write-off of $791,000 of unamortized costs on redeemed trust preferred securities. Non-interest income for the year ended December 31, 2007 excludes a net gain of $1.4 million from the sale of branches as compared to a net loss of $330,000 from the sale of bank property for the same period in 2006. Non-interest expense for the year ended December 31, 2007 excludes $2.4 million of severance related expenses and $185,000 in branch rationalization charges as compared to $740,000 of severance related expenses and $495,000 in branch rationalization charges for the same period in 2006. In addition, non-interest expense for the year ended December 31, 2007 excludes $124,000 resulting from the early extinguishment of FHLB borrowing. Non-interest income for the three months ended December 31, 2006 excludes a net loss of $330,000 from the sale of bank property. In addition, non-interest expense for the three months ended December 31, 2006 excludes $240,000 in severance related expenses and $495,000 in branch rationalization charges. (4) Data is adjusted for a 5% stock dividend declared in April 2007. (5) December 31, 2007 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) December 31, --------------------------- 2007 2006 ---------- ---------- ASSETS Cash and due from banks $ 81,479 $ 74,991 Interest-earning bank balances 2,380 48,066 Federal funds sold 2,654 47,043 ---------- ---------- Cash and cash equivalents 86,513 170,100 Investment securities available for sale (amortized cost - $427,378 and $488,007 December 31, 2007 and December 31, 2006, respectively) 425,805 481,952 Investment securities held to maturity (estimated fair value - $18,755 and $24,846 at December 31, 2007 and December 31, 2006, respectively) 18,965 25,441 Loans receivable (net of allowance for loan losses - $27,002 and $25,658 at December 31, 2007 and December 31, 2006, respectively) 2,482,917 2,340,965 Restricted equity investments 16,869 17,729 Bank properties and equipment, net 48,118 42,292 Real estate owned, net 1,449 600 Accrued interest receivable 15,018 14,657 Goodwill 127,894 128,117 Intangible assets, net 23,479 28,570 Deferred taxes, net 3,169 3,939 Bank owned life insurance 72,487 57,370 Other assets 15,709 13,831 ---------- ---------- Total assets $3,338,392 $3,325,563 ========== ========== LIABILITIES & SHAREHOLDERS' EQUITY LIABILITIES Deposits $2,699,091 $2,667,997 Advances from the Federal Home Loan Bank (FHLB) 63,483 103,560 Federal funds purchased 30,000 -- Securities sold under agreements to repurchase - FHLB 15,000 -- Securities sold under agreements to repurchase - customers 40,472 51,740 Obligation under capital lease 5,258 5,322 Junior subordinated debentures 97,941 108,250 Other liabilities 24,970 46,467 ---------- ---------- Total liabilities 2,976,215 2,983,336 ========== ========== SHAREHOLDERS' EQUITY Preferred stock, $1 par value, 1,000,000 shares authorized, none issued -- -- Common stock, $1 par value, 50,000,000 shares authorized, 22,722,655 and 20,507,549 issued at December 31, 2007 and December 31, 2006, respectively 22,723 20,508 Additional paid-in capital 336,668 304,857 Retained earnings 20,338 20,794 Accumulated other comprehensive loss (1,027) (3,932) Treasury stock at cost, 1,010,523 shares at December 31, 2007 (16,525) -- ---------- ---------- Total shareholders' equity 362,177 342,227 ---------- ---------- Total liabilities and shareholders' equity $3,338,392 $3,325,563 ========== ========== SUN BANCORP, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF INCOME (unaudited) (Dollars in thousands, except per share data) For the For the Three Months Ended Years Ended December 31, December 31, ------------------ ------------------ 2007 2006 2007 2006 -------- -------- -------- -------- INTEREST INCOME Interest and fees on loans $ 43,991 $ 42,991 $174,767 $160,876 Interest on taxable investment securities 4,306 4,252 17,741 19,195 Interest on non-taxable investment securities 728 517 2,818 1,564 Dividends on restricted equity investments 281 282 1,112 1,143 Interest on federal funds sold 86 494 1,725 1,172 -------- -------- -------- -------- Total interest income 49,392 48,536 198,163 183,950 -------- -------- -------- -------- INTEREST EXPENSE Interest on deposits 20,211 19,802 84,252 66,892 Interest on borrowed funds 1,556 1,997 6,267 9,571 Interest on junior subordinated debentures 1,787 2,192 8,468 8,409 -------- -------- -------- -------- Total interest expense 23,554 23,991 98,987 84,872 -------- -------- -------- -------- Net interest income 25,838 24,545 99,176 99,078 PROVISION FOR LOAN LOSSES 5,443 990 8,403 3,807 -------- -------- -------- -------- Net interest income after provision for loan losses 20,395 23,555 90,773 95,271 -------- -------- -------- -------- NON-INTEREST INCOME Service charges on deposit accounts 3,421 3,183 13,687 11,117 Other service charges 85 73 307 311 Net gain on sale of branches -- -- 1,443 -- (Loss) gain on sale of bank property & equipment -- (330) 12 (330) Loss on sale of investment securities -- (1) -- (21) Gain on sale of loans 342 463 1,689 1,127 Net gain on derivative instruments 511 200 1,567 1,178 Other 2,123 1,424 7,110 6,364 -------- -------- -------- -------- Total non-interest income 6,482 5,012 25,815 19,746 -------- -------- -------- -------- NON-INTEREST EXPENSE Salaries and employee benefits 11,004 10,842 45,432 45,079 Occupancy expense 2,830 3,361 11,491 12,136 Equipment expense 1,660 1,970 7,172 7,926 Amortization of intangible expenses 1,177 1,193 4,714 4,767 Data processing expense 1,078 895 4,249 4,283 Advertising expense 459 407 1,856 1,683 Other 3,320 3,221 14,049 13,519 -------- -------- -------- -------- Total non-interest expense 21,528 21,889 88,963 89,393 -------- -------- -------- -------- INCOME BEFORE INCOME TAXES 5,349 6,678 27,625 25,624 INCOME TAXES 1,479 2,224 8,273 8,350 -------- -------- -------- -------- NET INCOME $ 3,870 $ 4,454 $ 19,352 $ 17,274 ======== ======== ======== ======== Basic earnings per share (1) $ 0.18 $ 0.21 $ 0.89 $ 0.81 ======== ======== ======== ======== Diluted earnings per share (1) $ 0.17 $ 0.20 $ 0.86 $ 0.77 ======== ======== ======== ======== (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) 2007 2007 2007 2007 2006 Q4 Q3 Q2 Q1 Q4 ---------- ---------- ---------- ---------- ---------- Balance sheet at quarter end: Loans: Commercial and industrial $2,024,728 $1,990,027 $1,985,584 $1,972,491 $1,925,103 Home equity 264,965 258,991 245,283 234,982 232,321 Second mortgage 81,063 79,464 79,120 76,449 77,337 Residential real estate 49,750 54,601 47,101 38,798 38,418 Other 89,413 91,094 91,618 93,149 93,444 ---------- ---------- ---------- ---------- ---------- Total gross loans 2,509,919 2,474,177 2,448,706 2,415,869 2,366,623 Allowance for loan losses (27,002) (26,340) (26,079) (26,027) (25,658) ---------- ---------- ---------- ---------- ---------- Net loans 2,482,917 2,447,837 2,422,627 2,389,842 2,340,965 Goodwill 127,894 127,935 127,936 127,936 128,117 Intangible assets, net 23,479 24,656 25,833 27,011 28,570 Total assets 3,338,392 3,295,576 3,324,633 3,326,681 3,325,563 Total deposits 2,699,091 2,682,286 2,725,747 2,694,304 2,667,997 Advances from the Federal Home Loan Bank (FHLB) 63,483 64,763 66,029 100,481 103,560 Federal funds purchased 30,000 -- -- 1,500 -- Securities sold under agreements to re- purchase - FHLB 15,000 15,000 -- -- -- Securities sold under agreements to re- purchase - customers 40,472 46,499 44,612 42,511 51,740 Obligation under capital lease 5,258 5,275 5,291 5,307 5,322 Junior subordinated debentures 97,941 97,941 97,941 108,250 108,250 Total shareholders' equity 362,177 361,645 355,758 348,595 342,227 Quarterly average balance sheet: Loans: Commercial and in- dustrial $2,030,928 $1,981,778 $1,978,175 $1,956,190 $1,937,580 Home equity 263,245 250,474 240,150 233,837 229,002 Second mortgage 80,400 78,643 77,442 76,167 77,593 Residential real estate 50,734 49,635 39,193 37,710 35,323 Other 87,155 89,566 91,578 92,705 90,358 ---------- ---------- ---------- ---------- ---------- Total gross loans 2,512,462 2,450,096 2,426,538 2,396,609 2,369,856 Securities and other interest- earning assets 468,418 509,016 577,669 560,574 578,983 Total interest- earning assets 2,980,880 2,959,112 3,004,207 2,957,183 2,948,839 Total assets 3,322,686 3,292,687 3,341,506 3,302,913 3,288,123 Non-interest- bearing demand deposits 434,066 462,173 458,851 458,201 480,339 Total deposits 2,689,326 2,682,879 2,724,554 2,664,668 2,648,713 Total interest- bearing liabilities 2,499,003 2,445,187 2,501,896 2,466,678 2,445,320 Total shareholders' equity 363,302 359,949 353,280 344,717 339,839 Capital and credit quality measures: Total Capital (to Risk- Weighted Assets)(1): Sun Bancorp, Inc. 11.93% 11.97% 11.80% 11.98% 11.89% Sun National Bank 11.08% 11.06% 10.74% 10.64% 10.57% Tier I Capital (to Risk- Weighted Assets)(1): Sun Bancorp, Inc. 10.95% 10.99% 10.83% 11.00% 10.91% Sun National Bank 10.11% 10.05% 9.77% 9.66% 9.59% Leverage Ratio (1): Sun Bancorp, Inc. 9.67% 9.80% 9.46% 9.58% 9.40% Sun National Bank 8.98% 8.95% 8.54% 8.42% 8.28% Average equity to average assets 10.93% 10.93% 10.57% 10.44% 10.34% Allowance for loan losses to total gross loans 1.08% 1.06% 1.07% 1.08% 1.08% Non- performing assets to total gross loans and real estate owned 1.18% 0.90% 0.67% 0.63% 0.64% Allowance for loan losses to non- performing loans 95.77% 127.11% 169.98% 177.14% 175.50% Other data: Net charge- offs $ (4,781) $ (999) $ (898) $ (381) $ (1,117) ========= ========= ========= ========= ========= Non- performing assets: Non- accrual loans $ 26,853 $ 18,157 $ 14,505 $ 14,147 $ 14,322 Loans past due 90 days and accruing 1,343 2,565 837 546 298 Real estate owned, net 1,449 1,449 1,165 600 600 --------- --------- --------- --------- --------- Total non- per- forming assets $ 29,645 $ 22,171 $ 16,507 $ 15,293 $ 15,220 ========= ========= ========= ========= ========= (1) December 31, 2007 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) 2007 2007 2007 2007 2006 Q4 Q3 Q2 Q1 Q4 -------- -------- -------- -------- -------- Profitability for the quarter: Tax- equivalent interest income $ 49,783 $ 50,406 $ 50,049 $ 49,441 $ 48,807 Interest expense 23,554 24,567 26,108 24,758 23,991 Tax- equivalent net interest income 26,229 25,839 23,941 24,683 24,816 Tax- equivalent adjustment 391 384 391 350 271 Provision for loan losses 5,443 1,260 950 750 990 Non-interest income, excluding loss on sale of investment securities, net gain on sale of branches and net gain (loss) on sale or disposal of bank property and equipment 6,482 6,011 6,293 5,574 5,343 Loss on sale of investment securities -- -- -- -- (1) Net gain on sale of branches -- -- -- 1,443 -- Net gain (loss) on sale or disposal of bank property & equipment -- -- 12 -- (330) Non-interest expense, excluding amortization of intangible assets 20,351 20,669 20,840 22,389 20,696 Amortization of intangible assets 1,177 1,177 1,178 1,182 1,193 Income before income taxes 5,349 8,360 6,887 7,029 6,678 Income tax expense 1,479 2,475 1,975 2,344 2,224 Net income $ 3,870 $ 5,885 $ 4,912 $ 4,685 $ 4,454 ======== ======== ======== ======== ======== Financial ratios: Return on average assets(1) 0.47% 0.71% 0.59% 0.57% 0.54% Return on average equity(1) 4.26% 6.54% 5.56% 5.44% 5.24% Return on average tangible equity(1),(2) 7.33% 11.39% 9.88% 9.93% 9.78% Net interest margin(1) 3.52% 3.49% 3.19% 3.34% 3.37% Efficiency ratio 66.61% 69.43% 73.75% 75.19% 74.06% Efficiency ratio, excluding non-operating income and non- operating expense 66.61% 68.30% 71.77% 71.07% 70.78% Per share date: Earnings per common share(3): Basic $ 0.18 $ 0.27 $ 0.23 $ 0.22 $ 0.21 Diluted $ 0.17 $ 0.26 $ 0.22 $ 0.21 $ 0.20 Book value $ 16.68 $ 16.48 $ 16.21 $ 16.16 $ 15.89 Tangible book value $ 9.71 $ 9.53 $ 9.21 $ 8.98 $ 8.62 Average basic shares 21,825,667 22,045,407 21,738,367 21,547,912 21,504,499 Average diluted shares 22,435,324 22,735,620 22,670,769 22,596,591 22,602,237 Operating non- interest income: Service charges on deposit accounts $ 3,421 $ 3,585 $ 3,552 $ 3,129 $ 3,183 Other service charges 85 75 75 72 73 Gain on sale of loans 342 392 447 508 463 Net gain on derivative instruments 511 297 525 234 200 Other 2,123 1,662 1,694 1,631 1,424 -------- -------- -------- -------- -------- Total operating non- interest income 6,482 6,011 6,293 5,574 5,343 -------- -------- -------- -------- -------- Non-operating income(4): Loss on sale of investment securities -- -- -- -- (1) Net gain on sale of branches -- -- -- 1,443 -- Net gain (loss) on sale or disposal of bank property & equipment -- -- 12 -- (330) -------- -------- -------- -------- -------- Total non- operating income -- -- 12 1,443 (331) -------- -------- -------- -------- -------- Total non- interest income $ 6,482 $ 6,011 $ 6,305 $ 7,017 $ 5,012 ======== ======== ======== ======== ========= Operating non- interest expense: Salaries and employee benefits $ 11,004 $ 10,816 $ 10,937 $ 10,626 $ 10,602 Occupancy expense 2,830 2,773 2,717 3,012 2,876 Equipment expense 1,660 1,732 1,829 1,951 1,960 Amortization of intangible assets 1,177 1,177 1,178 1,182 1,193 Data processing expense 1,078 1,063 1,100 1,008 895 Advertising expense 459 415 509 473 407 Other expenses 3,320 3,685 3,538 3,002 3,221 -------- -------- -------- -------- -------- Total operating non- interest expense 21,528 21,661 21,808 21,254 21,154 -------- -------- -------- -------- -------- Non-operating expense(4): Lease buy-out expenses and other branch rational- ization charges -- 185 -- -- 495 Severance and other related expenses -- -- 86 2,317 240 Early extinguish- ment of borrowings -- -- 124 -- -- -------- -------- -------- -------- -------- Total non- operating expense -- 185 210 2,317 735 -------- -------- -------- -------- -------- Total non- interest expense $ 21,528 $ 21,846 $ 22,018 $ 23,571 $ 21,889 ======== ======== ======== ======== ========= (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 December 31, 2007 ----------------------------------- Average Income/ Yield/ Balance Expense Cost ---------- -------- ------ Interest-earning assets: Loans receivable(1),(2): Commercial and industrial $2,030,928 $ 35,943 7.08% Home equity 263,245 4,177 6.35 Second mortgage 80,400 1,343 6.68 Residential real estate 50,734 881 6.95 Other 87,155 1,647 7.56 ---------- -------- Total loans receivable 2,512,462 43,991 7.00 Investment securities(3) 451,493 5,605 4.97 Interest-earning bank balances 9,911 101 4.08 Federal funds sold 7,014 86 4.90 ---------- -------- Total interest-earning assets 2,980,880 49,783 6.68 ---------- -------- Cash and due from banks 64,168 Bank properties and equipment, net 45,983 Goodwill and intangible assets, net 152,147 Other assets 79,508 ---------- Total non-interest-earning assets 341,806 ========== Total assets $3,322,686 ========== Interest-bearing liabilities: Interest-bearing deposit accounts: Interest-bearing demand deposits $ 788,548 4,838 2.45% Savings deposits 446,530 3,104 2.78 Time deposits 1,020,182 12,269 4.81 ---------- -------- Total interest-bearing deposit accounts 2,255,260 20,211 3.58 ---------- -------- Borrowed money: Federal funds purchased 8,707 112 5.15 Securities sold under agreements to repurchase - customers 46,656 466 4.00 FHLB advances 85,175 881 4.14 Junior subordinated debentures 97,941 1,787 7.30 Obligation under capital lease 5,264 97 7.37 ---------- -------- Total borrowings 243,743 3,343 5.49 ---------- -------- Total interest-bearing liabilities 2,499,003 23,554 3.77 ---------- -------- Non-interest-bearing demand deposits 434,066 Other liabilities 26,315 ---------- Total non-interest-bearing liabilities 460,381 ---------- Total liabilities 2,959,384 Shareholders' equity 363,302 ---------- Total liabilities and shareholders' equity $3,322,686 ========== Net interest income $ 26,229 ======== Interest rate spread(4) 2.91% ====== Net interest margin(5) 3.52% ====== Ratio of average interest- earning assets to average interest-bearing liabilities 119.28% ====== For the Three Months Ended December 31, 2006 ------------------------------- Average Income/ Yield/ Balance Expense Cost ---------- -------- ------ Interest-earning assets: Loans receivable(1),(2): Commercial and industrial $1,937,580 $ 35,379 7.30% Home equity 229,002 3,823 6.68 Second mortgage 77,593 1,238 6.38 Residential real estate 35,323 687 7.78 Other 90,358 1,864 8.25 ---------- -------- Total loans receivable 2,369,856 42,991 7.26 Investment securities(3) 514,588 4,997 3.88 Interest-earning bank balances 26,924 325 4.83 Federal funds sold 37,471 494 5.27 ---------- -------- Total interest-earning assets 2,948,839 48,807 6.62 ---------- -------- Cash and due from banks 79,150 Bank properties and equipment, net 42,457 Goodwill and intangible assets, net 157,707 Other assets 59,970 ---------- Total non-interest-earning assets 339,284 ---------- Total assets $3,288,123 ========== Interest-bearing liabilities: Interest-bearing deposit accounts: Interest-bearing demand deposits $ 810,677 $ 6,372 3.14% Savings deposits 394,878 2,419 2.45 Time deposits 962,819 11,011 4.57 ---------- -------- Total interest-bearing deposit accounts 2,168,374 19,802 3.65 ---------- -------- Borrowed money: Federal funds purchased 152 2 5.26 Securities sold under agreements to repurchase - customers 55,757 642 4.61 FHLB advances 107,460 1,255 4.67 Junior subordinated debentures 108,250 2,192 8.10 Obligation under capital lease 5,327 98 7.36 ---------- -------- Total borrowings 276,946 4,189 6.05 ---------- -------- Total interest-bearing liabilities 2,445,320 23,991 3.92 ---------- -------- Non-interest-bearing demand deposits 480,339 Other liabilities 22,625 ---------- Total non-interest-bearing liabilities 502,964 ---------- Total liabilities 2,948,284 Shareholders' equity 339,839 ---------- Total liabilities and shareholders' equity $3,288,123 ========== Net interest income $ 24,816 ======== Interest rate spread(4) 2.70% ====== Net interest margin(5) 3.37% ====== Ratio of average interest- earning assets to average interest-bearing liabilities 120.59% ====== (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) Interest rate spread represents the difference between the average yield on interest-earning assets and the average cost of interest-bearing liabilities. (5) Net interest margin represents net interest income as a percentage of average interest-earning assets. SUN BANCORP, INC. AND SUBSIDIARIES AVERAGE BALANCE SHEETS (unaudited) (Dollars in thousands) For the Year Ended December 31, 2007 ------------------------------- Average Income/ Yield/ Balance Expense Cost ---------- -------- ------ Interest-earning assets: Loans receivable(1),(2): Commercial and industrial $1,986,959 $143,231 7.21% Home equity 247,017 16,010 6.48 Second mortgage 78,176 5,060 6.47 Residential real estate 44,368 3,362 7.58 Other 90,234 7,104 7.87 ---------- -------- Total loans receivable 2,446,754 174,767 7.14 Investment securities(3) 481,775 22,514 4.67 Interest-earning bank balances 13,871 673 4.85 Federal funds sold 32,966 1,725 5.23 ---------- -------- Total interest-earning assets 2,975,366 199,679 6.71 ---------- -------- Cash and due from banks 68,963 Bank properties and equipment, net 44,014 Goodwill and intangible assets, net 153,957 Other assets 72,641 ---------- Total non-interest- earning assets 339,575 ---------- Total assets $3,314,941 ---------- Interest-bearing liabilities: Interest-bearing deposit accounts: Interest-bearing demand deposits $ 759,855 22,130 2.91% Savings deposits 455,096 13,214 2.90 Time deposits 1,022,172 48,908 4.78 ---------- -------- Total interest-bearing deposit accounts 2,237,123 84,252 3.77 ---------- -------- Borrowed money: Federal funds purchased 2,929 155 5.29 Securities sold under agreements to repurchase - customers 44,213 1,961 4.44 FHLB advances 87,306 3,764 4.31 Junior subordinated debentures 101,330 8,468 8.36 Obligation under capital lease 5,288 387 7.32 ---------- -------- Total borrowings 241,066 14,735 6.11 ---------- -------- Total interest-bearing liabilities 2,478,189 98,987 3.99 ---------- -------- Non-interest-bearing demand deposits 453,281 Other liabilities 28,095 ---------- Total non-interest- bearing liabilities 481,376 ---------- Total liabilities 2,959,565 Shareholders' equity 355,376 ---------- Total liabilities and shareholders' equity $3,314,941 ========== Net interest income $100,692 ======== Interest rate spread(4) 2.72% ======= Net interest margin(5) 3.38% ======= Ratio of average interest- earning assets to average interest-bearing liabilities 120.06% ======= For the Year Ended December 31, 2006 ----------------------------------- Average Income/ Yield/ Balance Expense Cost ---------- -------- ------ Interest-earning assets: Loans receivable(1),(2): Commercial and industrial $1,880,475 $133,312 7.09% Home equity 202,072 13,326 6.59 Second mortgage 74,184 4,642 6.26 Residential real estate 30,264 2,460 8.13 Other 86,505 7,136 8.25 ---------- -------- Total loans receivable 2,273,500 160,876 7.08 Investment securities(3) 595,474 22,032 3.70 Interest-earning bank balances 14,676 702 4.78 Federal funds sold 23,938 1,172 4.90 ---------- -------- Total interest-earning assets 2,907,588 184,782 6.36 ---------- -------- Cash and due from banks 80,241 Bank properties and equipment, net 43,099 Goodwill and intangible assets, net 157,082 Other assets 57,321 ---------- Total non-interest- earning assets 337,743 ---------- Total assets 3,245,331 ========== Interest-bearing liabilities: Interest-bearing deposit accounts: Interest-bearing demand deposits $ 841,288 23,587 2.80% Savings deposits 365,932 6,687 1.83 Time deposits 889,192 36,618 4.12 ---------- -------- Total interest-bearing deposit accounts 2,096,412 66,892 3.19 ---------- -------- Borrowed money: Federal funds purchased 4,277 231 5.40 Securities sold under agreements to repurchase - customers 45,726 1,985 4.34 FHLB advances 147,017 6,833 4.65 Junior subordinated debentures 106,894 8,409 7.87 Obligation under capital lease 5,356 522 7.31 ---------- -------- Total borrowings 309,270 17,980 5.81 ---------- -------- Total interest-bearing liabilities 2,405,682 84,872 3.53 ---------- -------- Non-interest-bearing demand deposits 494,488 Other liabilities 17,851 ---------- Total non-interest- bearing liabilities 512,339 ---------- Total liabilities 2,918,021 Shareholders' equity 327,310 ---------- Total liabilities and shareholders' equity $3,245,331 ========== Net interest income $ 99,910 ======== Interest rate spread(4) 2.83% ====== Net interest margin(5) 3.44% ====== Ratio of average interest- earning assets to average interest-bearing liabilities 120.86% ====== (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) Interest rate spread represents the difference between the average yield on interest-earning assets and the average cost of interest-bearing liabilities. (5) Net interest margin represents net interest income as a percentage of average interest-earning assets.