SUN BANCORP, INC. /NJ 
By VINELAND, N.J., Jan. 22, 2014 /PRNewswire/ --
Fourth Quarter Highlights
-- Significant reduction in problem loans:
-- Classified Loans declined 41% from the prior quarter to $102.4
million
-- Non-Performing Loans declined 31% to $38.0 million during the
quarter and declined 60% or $57.6 million for the year
-- The ratio of non-performing loans/Loans held-for-investment decreased to
1.78%; down from 2.55% in the prior quarter and 3.64% in the fourth
quarter of 2012
-- Sale of $34.8 million of classified commercial loans to third-party
investors resulting in a net loss of $6.9 million inclusive of swap
termination costs and broker fees
-- Tier 1 Leverage Ratio ends year at 9.0% with the total risk based ratio
at 14.4%
Sun Bancorp, Inc. (NASDAQ: SNBC) (the "Company") reported today a net loss available to common shareholders of $8.4 million, or a loss of $0.10 per diluted share, for the quarter ended December 31, 2013, compared to a loss of $4.9 million, or a loss of $0.06 per diluted share, and a loss of $25.0 million, or a loss of $0.29 per diluted share, for the third quarter of 2013 and the fourth quarter of 2012, respectively.
The following are key items and events that occurred during the fourth quarter of 2013:
-- Significant asset quality improvement achieved resulting from the sale
of $34.8 million of classified loans, $20.6 million of payoffs in the
classified loan category and upgrades of $20.0 million from classified
to pass rated.
-- Quarterly provision expense of $2.6 million as compared to $724 thousand
in the third quarter of 2013. The allowance for loan losses equaled
$35.5 million at December 31, 2013, a decrease of $13.3 million from
September 30, 2013. The allowance for loan losses equaled 1.66% of gross
loans held-for-investment and 93.5% of non-performing loans at December
31, 2013 as compared to 2.25% and 88.2%, respectively, at September 30,
2013 and 2.02% and 55.3%, respectively, at December 31, 2012.
-- Professional fees totaled $4.9 million in the fourth quarter and $18.2
million for 2013
-- Net interest margin was 2.99% and average interest-bearing cash was $342
million
"While we are disappointed with our profitability, we are pleased with what we believe has been significant progress in reducing our problem loans and improving our foundation for future growth," said Sidney Brown. "We enter 2014 with a renewed focus on improving profitability through prudent growth in revenue, significant reduction in professional fees and an improvement in operational efficiency," added Thomas Brugger.
Discussion of Results:
Balance Sheet
-- Total assets were $3.09 billion at December 31, 2013, as compared to
$3.24 billion at September 30, 2013 and $3.22 billion at December 31,
2012.
-- Cash and cash equivalents were $293.8 million at December 31, 2013, as
compared to $453.6 million at September 30, 2013 and $169.6 million at
December 31, 2012. The decrease of $159.8 million in the fourth quarter
of 2013 as compared to the prior quarter was primarily due to declines
in deposits of $131.1 million and a net increase of $32.8 million in
investment securities. The decline in deposits was driven by planned
deposit run off in government deposits and a seasonal decline in
commercial deposits. Total deposits at December 31, 2013 were $2.62
billion.
-- Investment securities available for sale were $440.1 million as of
December 31, 2013 compared to $407.2 million at September 30, 2013 and
$443.2 million at December 31, 2012. The increase of $32.9 million in
the fourth quarter of 2013 from the prior quarter was due to the
purchase of $54.5 million of asset backed and mortgage backed
securities, offset by paydowns.
-- Gross loans held-for-investment were $2.14 billion at December 31, 2013,
as compared to $2.17 billion at September 30, 2013 and $2.28 billion at
December 31, 2012. Since December 31, 2012, gross loans
held-for-investment decreased $138.9 million, primarily due to paydowns
and sales of commercial loans and the sale of jumbo residential
mortgages.
Net Interest Income and Margin
-- Net interest income decreased $1.0 million from the linked quarter to
$21.9 million for the three months ended December 31, 2013. The net
interest margin decreased 11 basis points to 2.99% for the three months
ended December 31, 2013 from 3.10% for the linked quarter, and decreased
31 basis points as compared to the fourth quarter of 2012. The average
yield on interest-earning assets decreased 14 basis points to 3.47% at
December 31, 2013 from 3.61% at September 30, 2013. This decrease was
due to a decrease in commercial loan yields of 31 basis points as
compared to the linked quarter resulting from a prior quarter interest
recovery of $1.2 million. Excluding this item, the margin in the third
quarter of 2013 would have been 2.90%. The margin variance between the
quarter ended December 31, 2013 and the comparable prior year period is
primarily due to a decrease of $167.1 million in average commercial
loans and an increase of $303.8 million in average interest-earning bank
balances.
Non-Interest Income
-- Non-interest income was $4.7 million for the quarter ended December 31,
2013, as compared to $5.8 million for the quarter ended September 30,
2013 and $6.7 million for the comparable prior year quarter. The
decrease from the linked quarter was primarily attributable to a
decrease in net mortgage banking revenue of $593 thousand and an
increase of $330 thousand in negative derivative credit valuation
adjustments from the prior quarter. The decline in mortgage banking
revenue continues to be due to lower production volume in a higher
interest rate environment. The negative credit valuation adjustment of
$710 thousand in the fourth quarter of 2013 was primarily due to swap
termination fees of $869 thousand recorded on three commercial
relationships that were sold during the quarter.
Non-Interest Expense
-- Non-interest expense was $32.5 million in the fourth quarter of 2013, a
decrease of $460 thousand compared to the linked quarter and an increase
of $960 thousand over the comparable prior year quarter. In comparison
to the linked quarter, decreases in professional fees and commission
expense of $1.1 million and $903 thousand, respectively, were partially
offset by increases of $414 thousand in salaries and employee benefits,
other expense of $405 thousand, real estate owned expense of $277
thousand and advertising expense of $227 thousand. Professional fees
declined as a result of a decreasing need for regulatory compliance
consulting services. Commission expense has decreased due to reduced
mortgage production volumes. Salaries and benefits expense has
increased from the prior quarter due to $585 thousand of severance costs
recorded in the fourth quarter. Other expense for the current quarter
includes $551 thousand of broker fees associated with commercial loan
sales. Professional fees increased by $3.5 million from the same prior
year quarter due to regulatory compliance and mortgage risk related
consulting services and platform enhancements performed in 2013. This
increase was partially offset by decreases in commission expense, real
estate owned expense, net and amortization of intangible assets of $1.4
million, $479 thousand and $466 thousand, respectively, compared to the
fourth quarter in 2012.
Asset Quality
-- During the fourth quarter of 2013, provision expense of $2.6 million was
recorded, as compared to $724 thousand in the linked quarter and $24.2
million in the comparable prior year quarter. The allowance for loan
losses was $35.5 million at December 31, 2013, or 1.66% of gross loans
held-for-investment, as compared to 2.25% at September 30, 2013 and
2.02% at December 31, 2012. Net charge-offs were $16.0 million in the
fourth quarter of 2013, as compared to net recoveries in the linked
quarter of $123 thousand and net charge-offs in the prior year quarter
of $26.7 million. Net charge-offs in the fourth quarter of 2013 included
$10.2 million related to the sale of $34.8 million of classified
commercial real estate loans and $5.0 million related to the charge-off
of specific reserves on two legacy non-performing loans.
-- Total non-performing assets were $40.5 million, or 1.87% of total gross
loans held-for-investment, loans held-for-sale and real estate owned at
December 31, 2013, as compared to $60.5 million, or 2.76%, and $103.1
million, or 4.29%, respectively, at September 30, 2013 and December 31,
2012. Non-performing loans decreased $17.4 million over the linked
quarter to $38.0 million at December 31, 2013 from $55.4 million at
September 30, 2013 and decreased $57.6 million from $95.6 million at
December 31, 2012. The decrease from the linked quarter was due to the
aforementioned loan sales which included $23.2 million of non-performing
commercial real estate loans and charge-offs recorded of $5.0 million on
two legacy non-performing commercial loans. Offsetting these declines
were downgrades of $13.9 million to non-performing status. For the year,
successful workout resolution has resulted in the payoff of ten
non-performing commercial loans totaling $40.5 million.
Capital
-- Shareholders' equity totaled $245.1 million at December 31, 2013
compared to $257.1 million at September 30, 2013 and $262.6 million at
December 31, 2012. The Company's tangible equity to tangible assets
ratio was 6.76% at December 31, 2013, as compared to 6.81% at September
30, 2013 and 6.95% at December 31, 2012. At December 31, 2013, the
Company's total risk-based capital ratio, Tier 1 capital ratio and
leverage capital ratio were approximately 14.40%, 12.34%, and 8.98%,
respectively. At December 31, 2013, Sun National Bank's total
risk-based capital ratio, Tier 1 capital ratio and leverage capital
ratio were approximately 13.64%, 12.39%, and 9.01%, respectively.
The Company will hold its regularly scheduled conference call on Thursday January 23, 2014, at 11:00 a.m. (ET). Participants may listen to the live webcast through the Company's website at www.sunnationalbank.com. Participants are advised to log on 10 minutes ahead of the scheduled start of the call. An Internet-based replay will be available at the Company's website for two weeks following the call.
Sun Bancorp, Inc. (NASDAQ: SNBC) is a $3.09 billion asset bank holding company headquartered in Vineland, New Jersey, with its executive offices located in Mt. Laurel, New Jersey. Its primary subsidiary is Sun National Bank, a full service commercial bank serving customers through 50-plus locations in New Jersey. Sun National Bank has been named one of Forbes Magazine's "Most Trustworthy Companies" for five years running. Sun National Bank is an Equal Housing Lender and its deposits are insured up to the legal maximum by the Federal Deposit Insurance Corporation (FDIC). For more information about Sun National Bank and Sun Bancorp, Inc., visit www.sunnationalbank.com.
Cautionary Note Regarding Forward-Looking Statements
The foregoing material contains forward-looking statements as defined in the Private Securities Litigation Reform Act of 1995, concerning the financial condition, results of operations and business of the Company. Forward-looking statements are statements that include projections, predictions, expectations or beliefs about events or results or otherwise are not statements of historical facts, including statements about reducing problem loans, improving our foundation for future growth, significantly reducing professional fees, improving our profitability through revenue growth and improving operational efficiency.. Actual results and trends could differ materially from those set forth in such statements and there can be no assurances that we will further reduce problem loans, achieve desired future growth, reduce professional fees, improve our profitability, increase revenues or improve our operational efficiency. We caution that such statements are subject to a number of uncertainties, including those detailed under the headings "Risk Factors" and "Management's Discussion and Analysis of Financial Condition and Results of Operations" in the Company's Form 10-K for the fiscal year ended December 31, 2012, its Form 10-Qs for the quarters ended March 31, 2013, June 30, 2013, and September 30, 2013 and in other filings made pursuant to the Securities Exchange Act of 1934, as amended. Therefore, readers should not place undue reliance on any forward-looking statements. The Company does not undertake, and specifically disclaims, any obligation to publicly release the results of any revisions that may be made to any forward-looking statements to reflect the occurrence of anticipated or unanticipated events or circumstances after the date of such statements.
Non-GAAP Financial Measures (Unaudited)
This news release references tax-equivalent interest income. Tax-equivalent interest income is a non-GAAP financial measure. Tax-equivalent interest income assumes a 35% marginal federal
tax rate for all periods. The fully taxable equivalent adjustments for the three months ended December 31, 2013, September 30, 2013, June 30, 2013, March 31, 2013, and December 31, 2012 were
$167 thousand, $167 thousand, $175 thousand, $212 thousand, and $212 thousand, respectively. The fully taxable equivalent adjustments for the year ended December 31, 2013 and December 31,
2012 were $720 thousand and $870 thousand, respectively. This release also references tangible book value per common share. Tangible book value per common share is a non-GAAP financial
measure. Tangible book value per common share is a ratio of tangible equity, shareholder's equity less intangible assets, to outstanding common shares. Intangible assets at December 31,
2013, September 30, 2013, June 30, 2013, March 31, 2013, and December 31, 2012 were $39.0 million, $39.4 million, $40.0 million, $40.5 million, and $41.5 million, respectively.
Tax-equivalent interest income
The following reconciles net interest income to net interest income on a fully taxable equivalent basis using a 35% tax rate for the three months ended December 31, 2013, September 30, 2013,
June 30, 2013, March 31, 2013, and December 31, 2012 and the year ended December 31, 2013 and December 31, 2012.
December September June March December
31, 30, 30, 31, 31,
2013 2013 2013 2013 2012
For Three Months Ended:
----------------------- ---
Net interest income $21,935 $22,980 $21,776 $23,078 $23,981
Effect of tax exempt income 167 167 175 212 212
--- --- --- --- ---
Net interest income, tax equivalent basis $22,102 $23,147 $21,951 $23,290 $24,193
For the Year Ended: December 31,
------------
2013 2012
Net interest income $89,769 97,848
Effect of tax exempt income 720 870
--- ---
Net interest income, tax equivalent basis $90,489 98,718
======= ======
Tangible book value per common share
The following reconciles shareholders' equity to tangible equity by reducing shareholders' equity by the intangible asset balance at December, 31, 2013, September 30, 2013, June 30, 2013,
March 31, 2013, and December 31, 2012.
December September June March December
31, 2013 30, 2013 30, 31, 31, 2012
2013 2013
Tangible book value per common share:
Shareholders' equity $245,134 $257,139 $261,664 $264,339 $262,596
Less: Intangible assets 38,993 39,448 39,988 40,529 41,450
------ ------ ------ ------ ------
Tangible equity $206,141 $217,692 $221,676 $223,811 $221,147
Common stock 88,711 88,618 88,572 88,403 88,301
Less: Treasury stock 1,997 2,068 2,107 2,107 2,107
----- ----- ----- ----- -----
Total outstanding shares 86,714 86,550 86,465 86,296 86,194
------ ------ ------ ------ ------
Tangible book value per common share: $2.38 $2.52 $2.56 $2.59 $2.57
SUN BANCORP, INC. AND SUBSIDIARIES
FINANCIAL HIGHLIGHTS (Unaudited)
(Dollars in thousands, except share and per share amounts)
For the Three Months
Ended For the Year Ended
December 31, December,
------------ ---------
2013 2012 2013 2012
---- ---- ---- ----
Profitability for the period:
Net interest income $21,935 $23,981 $89,769 $97,848
Provision for loan losses 2,635 24,154 1,647 57,215
Non-interest income 4,742 6,816 31,681 29,450
Non-interest expense 32,457 31,597 129,949 120,608
Loss before income taxes (8,415) (24,954) (10,146) (50,525)
Income tax benefit - - - (34)
Net loss available to common shareholders $(8,415) $(24,954) $(10,146) $(50,491)
========================================= ======= ======= ======= ======
Financial ratios:
Return on average assets(1) (1.05)% (3.13)% (0.31)% (1.60)%
Return on average equity(1) (13.11)% (34.70)% (3.89)% (17.19)%
Return on average tangible equity(1),(2) (15.47)% (40.61)% (4.59)% (20.17)%
Net interest margin(1) 2.99% 3.30% 3.05% 3.43%
Efficiency ratio 121.67% 102.60% 107.00% 94.21%
Loss per common share:
Basic $(0.10) $(0.29) $(0.12) $(0.59)
Diluted $(0.10) $(0.29) $(0.12) $(0.59)
Average equity to average assets 8.01% 9.01% 8.09% 9.31%
-------------------------------- ---- ---- ---- ----
December 31,
------------
2013 2012
---- ----
At period-end:
Total assets $3,087,350 $3,224,031
Total deposits 2,621,571 2,713,224
Loans receivable, net of allowance for loan losses 2,101,754 2,230,287
Loans held-for-sale 21,075 120,935
Investments 457,797 461,980
Borrowings 68,765 70,992
Junior subordinated debentures 92,786 92,786
Shareholders' equity 245,134 262,595
Credit quality and capital ratios:
Allowance for loan losses to gross loans held-for- 1.66% 2.02%
investment
Non-performing loans held-for-investment to gross loans 1.78% 3.64%
held-for-investment
Non-performing assets to gross loans 1.87% 4.29%
held-for-investment, loans held-for-sale and real estate
owned
Allowance for loan losses to non-performing loans 93.52% 55.33%
held-for-investment
Total capital (to risk-weighted assets) (3):
Sun Bancorp, Inc. 14.40% 13.72%
Sun National Bank 13.64% 13.02%
Tier 1 capital (to risk-weighted assets) (3):
Sun Bancorp, Inc. 12.34% 11.82%
Sun National Bank 12.39% 11.76%
Leverage ratio:
Sun Bancorp, Inc. 8.98% 9.30%
Sun National Bank 9.01% 9.24%
Book value per common share $2.83 $3.05
Tangible book value per common share $2.38 $2.57
------------------------------------ ----- -----
(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) December 31, 2013 capital ratios are estimated, subject to regulatory filings.
SUN BANCORP, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION (Unaudited)
(Dollars in thousands, except par value amounts)
December December
31, 31,
2013 2012
---- ----
ASSETS
Cash and due from banks $64,075 $77,564
Interest-earning bank balances 229,687 92,052
------------------------------ ------- ------
Cash and cash equivalents 293,762 169,616
Investment securities available for sale (amortized cost of $452,023 and 440,097 443,182
$439,488 at December 31, 2013 and December 31, 2012, respectively)
Investment securities held to maturity (estimated fair value of $692 and $960 at 681 912
December 31, 2013 and December 31, 2012, respectively)
Loans receivable (net of allowance for loan losses of $35,537 and $45,873 at 2,101,754 2,230,287
December 31, 2013 and December 31, 2012, respectively)
Loans held-for-sale, at lower of cost or market - 21,922
Loans held-for-sale, at fair value 21,075 99,013
Restricted equity investments, at cost 17,019 17,886
Bank properties and equipment, net 49,095 50,805
Real estate owned 2,503 7,473
Accrued interest receivable 6,612 8,054
Goodwill 38,188 38,188
Intangible assets 805 3,262
Deferred taxes, net 4,872 -
Bank owned life insurance (BOLI) 77,236 76,858
Other assets 33,651 56,573
------------ ------ ------
Total assets $3,087,350 $3,224,031
============ ========== ==========
LIABILITIES AND SHAREHOLDERS' EQUITY
Liabilities:
Deposits $2,621,571 $2,713,224
Securities sold under agreements to repurchase - customers 478 1,968
Advances from the Federal Home Loan Bank of New York (FHLBNY) 60,956 61,415
Obligations under capital lease 7,331 7,609
Junior subordinated debentures 92,786 92,786
Deferred taxes, net - 1,509
Other liabilities 59,094 82,925
----------------- ------ ------
Total liabilities 2,842,216 2,961,436
----------------- --------- ---------
Shareholders' equity:
Preferred stock, $1 par value, 1,000,000 shares authorized; none issued - -
Common stock, $1 par value, 200,000,000 shares authorized; 88,711,035 shares 88,711 88,301
issued and 86,714,414 shares outstanding at December 31, 2013; 88,300,637
shares issued and 86,193,914 shares outstanding at December 31, 2012
Additional paid-in capital 506,719 506,537
Retained deficit (318,157) (308,011)
Accumulated other comprehensive (loss) income (7,055) 2,186
Deferred compensation plan trust (522) (256)
Treasury stock at cost, 1,996,621 shares at December 31, 2013; and 2,106,723 (24,562) (26,162)
shares at December 31, 2012
---------------------------
Total shareholders' equity 245,134 262,595
-------------------------- ------- -------
Total liabilities and shareholders' equity $3,087,350 $3,224,031
========================================== ========== ==========
SUN BANCORP, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS (Unaudited)
(Dollars in thousands, except per share amounts)
For the Three Months For the Year Ended
December 31,
Ended December 31,
2013 2012 2013 2012
---- ---- ---- ----
INTEREST INCOME
Interest and fees on loans $22,752 $25,670 $96,172 $103,707
Interest on taxable investment securities 2,219 1,860 6,668 9,138
Interest on non-taxable investment securities 310 390 1,338 1,618
Dividends on restricted equity investments 219 235 904 970
------------------------------------------ --- --- --- ---
Total interest income 25,500 28,155 105,082 115,433
--------------------- ------ ------ ------- -------
INTEREST EXPENSE
Interest on deposits 2,576 3,143 11,349 13,553
Interest on funds borrowed 444 460 1,776 1,438
Interest on junior subordinated debentures 545 571 2,188 2,594
------------------------------------------ --- --- ----- -----
Total interest expense 3,565 4,174 15,313 17,585
---------------------- ----- ----- ------ ------
Net interest income 21,935 23,981 89,769 97,848
PROVISION FOR LOAN LOSSES 2,635 24,154 1,647 57,215
------------------------- ----- ------ ----- ------
Net interest income (loss) after provision for loan losses 19,300 (173) 88,122 40,633
---------------------------------------------------------- ------ ---- ------ ------
NON-INTEREST INCOME
Service charges on deposit accounts 2,263 2,486 9,056 10,954
Mortgage banking revenue, net 1,000 3,812 11,598 10,551
(Loss) gain on sale of investment securities - (196) 3,489 234
Investment products income 599 606 2,684 2,296
BOLI income 466 488 1,882 1,986
Derivative credit valuation adjustment (710) (1,750) (1,588) (2,275)
Other 1,124 1,270 4,560 4,929
----- ----- ----- ----- -----
Total non-interest income 4,742 6,716 31,681 28,675
------------------------- ----- ----- ------ ------
NON-INTEREST EXPENSE
Salaries and employee benefits 13,070 13,331 53,037 54,241
Commission expense 1,098 2,514 7,696 8,259
Occupancy expense 3,406 3,416 13,519 13,011
Equipment expense 1,871 2,005 7,356 7,399
Amortization of intangible assets 455 921 2,457 3,685
Data processing expense 1,223 1,138 4,244 4,384
Professional fees 4,891 1,389 18,246 3,459
Insurance expenses 1,498 1,506 5,966 5,824
Advertising expense 903 1,040 2,830 2,809
Problem loan expense 769 776 3,407 5,681
Real estate owned expense, net 529 1,008 2,270 2,358
Office supplies expense 245 298 857 1,247
Other 2,499 2,155 8,064 7,476
----- ----- ----- ----- -----
Total non-interest expense 32,457 31,497 129,949 119,833
-------------------------- ------ ------ ------- -------
LOSS BEFORE INCOME TAXES (8,415) (24,954) (10,146) (50,525)
INCOME TAX BENEFIT - - - (34)
------------------ --- --- --- ---
NET LOSS AVAILABLE TO COMMON SHAREHOLDERS $(8,415) $(24,954) $(10,146) $(50,491)
========================================= ======= ======== ======== =======
Basic loss per share $(0.10) $(0.29) $(0.12) $(0.59)
-------------------- ------ ------ ------ ------
Diluted loss per share $(0.10) $(0.29) $(0.12) $(0.59)
====================== ====== ====== ====== ======
Weighted average shares - basic 86,583,363 86,082,669 86,415,812 85,938,714
=============================== ========== ========== ========== ==========
Weighted average shares - diluted 86,583,363 86,082,669 86,415,812 85,938,714
================================= ========== ========== ========== ==========
SUN BANCORP, INC. AND SUBSIDIARIES
HISTORICAL TRENDS IN QUARTERLY FINANCIAL DATA (Unaudited)
(Dollars in thousands)
2013 2013 2013 2013 2012
Q4 Q3 Q2 Q1 Q4
--- --- --- --- ---
Balance sheet at quarter end:
Cash and cash equivalents $293,762 $453,583 $442,239 $311,660 $169,616
Investment securities 457,797 425,029 361,149 335,844 461,980
Loans held-for-investment:
Commercial and industrial 1,587,566 1,636,856 1,676,133 1,737,079 1,725,567
Home equity 188,478 192,135 195,938 200,084 207,720
Second mortgage 25,279 26,028 27,276 29,235 30,842
Residential real estate 305,179 281,537 225,147 248,875 273,413
Other 30,789 32,984 34,298 36,287 38,618
----- ------ ------ ------ ------ ------
Total gross loans held-for-investment 2,137,291 2,169,540 2,158,792 2,251,560 2,276,160
Allowance for loan losses (35,537) (48,854) (48,007) (47,124) (45,873)
------------------------- ------- ------- ------- ------- -------
Net loans held-for-investment 2,101,754 2,120,686 2,110,785 2,204,436 2,230,287
Loans held-for-sale 21,075 18,707 69,417 41,469 120,935
Goodwill 38,188 38,188 38,188 38,188 38,188
Intangible assets 805 1,260 1,800 2,341 3,262
Total assets 3,087,350 3,236,321 3,205,921 3,227,146 3,224,031
Total deposits 2,621,571 2,752,693 2,722,038 2,723,337 2,713,224
Securities sold under agreements to 478 554 562 2,726 1,968
repurchase - customers
Advances from FHLBNY 60,956 60,997 61,037 61,077 61,415
Obligations under capital lease 7,331 7,402 7,472 7,541 7,609
Junior subordinated debentures 92,786 92,786 92,786 92,786 92,786
Total shareholders' equity 245,134 257,140 261,664 264,341 262,596
-------------------------- ------- ------- ------- ------- -------
Quarterly average balance sheet:
Loans(1):
Commercial and industrial $1,621,222 $1,671,302 $1,719,278 $1,744,553 $1,788,347
Home equity 190,394 194,622 197,237 204,311 210,085
Second mortgage 26,142 27,041 28,679 30,347 32,442
Residential real estate 312,977 299,667 307,248 330,916 319,427
Other 26,134 27,723 28,929 30,410 32,444
----- ------ ------ ------ ------ ------
Total gross loans 2,176,869 2,220,355 2,281,371 2,340,537 2,382,745
Securities and other interest-earning assets 782,200 763,575 680,659 607,284 545,781
Total interest-earning assets 2,959,069 2,983,930 2,962,030 2,947,821 2,928,526
Total assets 3,205,900 3,264,884 3,222,106 3,206,536 3,193,607
Non-interest-bearing demand deposits 585,530 549,684 531,210 506,600 511,813
Total deposits 2,718,905 2,746,820 2,722,651 2,703,039 2,660,405
Total interest-bearing liabilities 2,295,072 2,358,923 2,355,086 2,360,883 2,318,794
Total shareholders' equity 256,783 260,701 263,108 263,070 287,698
-------------------------- ------- ------- ------- ------- -------
Capital and credit quality measures:
Total capital (to risk-weighted assets) (2):
Sun Bancorp, Inc. 14.40% 14.72% 14.80% 14.21% 13.72%
Sun National Bank 13.64% 13.96% 14.05% 13.50% 13.02%
Tier 1 capital (to risk-weighted assets) (2):
Sun Bancorp, Inc. 12.34% 12.76% 12.91% 12.32% 11.82%
Sun National Bank 12.39% 12.70% 12.79% 12.25% 11.76%
Leverage ratio:
Sun Bancorp, Inc. 8.98% 9.13% 9.43% 9.40% 9.30%
Sun National Bank 9.01% 9.09% 9.33% 9.33% 9.24%
Average equity to average assets 8.01% 7.99% 8.17% 8.20% 9.01%
Allowance for loan losses to total gross loans 1.66% 2.25% 2.22% 2.09% 2.02%
held-for-investment
Non-performing loans held-for-investment to 1.78% 2.55% 3.32% 3.28% 3.64%
gross loans held-for-investment
Non-performing assets to gross loans 1.87% 2.76% 3.51% 3.57% 4.29%
held-for-investment, loans held-for-sale and
real estate owned
Allowance for loan losses to non-performing 93.52% 88.19% 66.93% 63.87% 55.33%
loans held-for-investment
Other data:
Net (charge-offs) recoveries (15,952) 123 2,766 1,080 (26,690)
Non-performing assets:
Non-accrual loans $29,811 $44,979 $54,031 $57,143 $64,660
Non-accrual loans held-for-sale - - - - 10,224
Troubled debt restructurings, non-accrual 8,166 10,416 17,693 16,640 18,244
Troubled debt restructurings, held-for-sale - - - - 2,499
Loans past due 90 days and accruing - - - - -
Real estate owned, net 2,503 5,059 6,743 8,472 7,473
---------------------- ----- ----- ----- ----- -----
Total non-performing assets $40,480 60,454 78,467 $82,255 $103,100
(1) Average balances include non-accrual loans and loans held-for-sale.
(2) December 31, 2013 capital ratios are estimated, subject to regulatory filings.
SUN BANCORP, INC. AND SUBSIDIARIES
HISTORICAL TRENDS IN QUARTERLY FINANCIAL DATA (Unaudited)
(Dollars in thousands, except share and per share amounts)
2013 2013 2013 2013 2012
Q4 Q3 Q2 Q1 Q4
--- --- --- --- ---
Profitability for the quarter:
Tax-equivalent interest income $25,667 $26,955 $25,888 $27,295 $28,367
Interest expense 3,565 3,808 3,937 4,005 4,174
Tax-equivalent net interest income 22,102 23,147 21,951 23,290 24,193
Tax-equivalent adjustment 167 167 175 212 212
Provision for loan losses 2,635 724 (1,883) 171 24,154
Non-interest income 4,742 5,799 10,211 10,882 6,716
Non-interest expense excluding 32,002 32,377 32,651 30,415 30,576
amortization of intangible assets
Amortization of intangible assets 455 540 541 921 921
(Loss) income before income taxes (8,415) (4,862) 678 2,453 (24,954)
Net (loss) income (8,415) (4,862) 678 2,453 (24,954)
Net (loss) income available to common $(8,415) $(4,862) $678 $2,453 $(24,954)
shareholders
============
Financial ratios:
Return on average assets (1) (1.05)% (0.60)% 0.08% 0.31% (3.13)%
Return on average equity (1) (13.11)% (7.46)% 1.03% 3.73% (34.70)%
Return on average tangible equity (1),(2) (15.47)% (8.80)% 1.22% 4.42% (40.61)%
Net interest margin (1) 2.99% 3.10% 2.96% 3.16% 3.30%
Efficiency ratio 121.67% 114.38% 103.77% 92.27% 102.60%
Per share data:
(Loss) income per common share:
Basic $(0.10) $(0.06) $0.01 $0.03 $(0.29)
Diluted $(0.10) $(0.06) $0.01 $0.03 $(0.29)
Book value $2.83 $2.97 $3.03 $3.06 $3.05
Tangible book value $2.38 $2.52 $2.56 $2.59 $2.57
Average basic shares 86,583,363 86,499,587 86,323,099 86,245,121 86,082,669
Average diluted shares 86,583,363 86,499,587 86,356,796 86,370,435 86,082,669
Non-interest income:
Service charges on deposit accounts $2,263 $2,314 $2,250 $2,229 $2,486
Mortgage banking revenue, net 1,000 1,593 5,601 3,404 3,812
Net gain (loss) on sale of investment - 2 (47) 3,487 (196)
securities
Investment products income 599 678 728 679 606
BOLI income 466 482 486 448 488
Derivative credit valuation adjustment (710) (380) 6 (504) (1,750)
Other income 1,124 1,110 1,187 1,139 1,270
------------ ----- ----- ----- ----- -----
Total non-interest income $4,742 $5,799 $10,211 $10,882 $6,716
========================= ====== ====== ======= ======= ======
Non-interest expense:
Salaries and employee benefits $13,070 $12,656 $13,019 $14,292 $13,331
Commission expense 1,098 2,001 2,556 2,041 2,514
Occupancy expense 3,406 3,456 3,081 3,576 3,416
Equipment expense 1,871 1,796 1,830 1,859 2,005
Amortization of intangible assets 455 540 541 921 921
Data processing expense 1,223 995 1,027 999 1,138
Professional fees 4,891 5,947 4,761 2,647 1,389
Insurance expense 1,498 1,496 1,542 1,430 1,506
Advertising expense 903 676 698 553 1,040
Problem loan costs 769 816 1,023 799 776
Real estate owned expense, net 529 252 1,255 234 1,008
Office supplies expense 245 192 191 229 298
Other expense 2,499 2,094 1,668 1,756 2,155
------------- ----- ----- ----- ----- -----
Total non-interest expense $32,457 $32,917 $33,192 $31,336 $31,497
========================== ======= ======= ======= ======= =======
(1) Amounts are annualized.
(2) Return on average tangible equity is computed by dividing annualized net income for the period by average tangible equity. Average tangible equity
equals average equity less average identifiable intangible assets and goodwill.
SUN BANCORP, INC. AND SUBSIDIARIES
AVERAGE BALANCE SHEETS (Unaudited)
(Dollars in thousands)
For the Three Months Ended December 31,
---------------------------------------
2013 2012
---- ----
Average Income/ Yield/ Average Income/ Yield/
Balance Expense Cost Balance Expense Cost
------- ------- ---- ------- ------- ----
Interest-earning assets:
Loans receivable (1),(2):
Commercial and industrial $1,621,222 $17,406 4.29% $1,788,347 $19,628 4.39%
Home equity 190,394 1,853 3.89 210,085 2,055 3.91
Second mortgage 26,142 367 5.62 32,442 470 5.79
Residential real estate 312,977 2,671 3.41 319,427 2,959 3.71
Other 26,134 456 6.98 32,444 559 6.89
------ --- ------ ---
Total loans receivable 2,176,869 22,753 4.18 2,382,745 25,671 4.31
Investment securities(3) 439,788 2,693 2.45 507,158 2,672 2.11
Interest-earning bank balances 342,412 221 0.26 38,623 24 0.25
------- --- ------ ---
Total interest-earning assets 2,959,069 25,667 3.47 2,928,526 28,367 3.87
--------- ------ ------- ------
Non-interest earning assets:
Cash and due from banks 66,662 72,129
Bank properties and equipment, net 49,300 51,515
Goodwill and intangible assets, net 39,190 41,902
Other assets 91,679 99,535
------ ------
Total non-interest-earning assets 246,831 265,081
------- -------
Total assets $3,205,900 $3,193,607
======== =======
Interest-bearing liabilities:
Interest-bearing deposit accounts:
Interest-bearing demand deposits $1,223,184 $960 0.31% $1,224,254 $1,178 0.38%
Savings deposits 268,196 195 0.29 263,949 228 0.35
Time deposits 641,995 1,421 0.89 660,389 1,737 1.05
------- ----- ------- -----
Total interest-bearing deposit 2,133,375 2,575 0.48 2,148,592 3,143 0.59
accounts
Short-term borrowings:
Fed Funds Purchased 54 - - - - -
Securities sold under agreements to 512 - - 3,250 1 0.12
repurchase - customers
Long-term borrowings:
FHLBNY advances (4) 60,981 320 2.10 66,527 331 1.99
Obligations under capital lease 7,364 124 6.74 7,639 127 6.65
Junior subordinated debentures 92,786 545 2.35 92,786 571 2.46
------ --- ------ ---
Total borrowings 161,697 989 2.45 170,202 1,030 2.42
------- --- ------- -----
Total interest-bearing liabilities 2,295,072 3,565 0.62 2,318,794 4,173 0.72
--------- ----- ------- -----
Non-interest bearing liabilities:
Non-interest-bearing demand deposits 585,530 511,813
Other liabilities 68,515 75,302
------ ------
Total non-interest bearing liabilities 654,045 587,115
------- -------
Total liabilities 2,949,117 2,905,909
Shareholders' equity 256,783 287,698
------- -------
Total liabilities and shareholders' $3,205,900 $3,193,607
equity
Net interest income $22,102 $24,194
======= =======
Interest rate spread (5) 2.85% 3.15%
==== ====
Net interest margin (6) 2.99% 3.30%
==== ====
Ratio of average interest-earning assets to 128.93% 126.30%
average interest-bearing liabilities
(1) Average balances include non-accrual loans and loans held-for-sale.
(2) Loan fees are included in interest income and the amount is not material for this analysis.
(3) Interest earned on non-taxable investment securities is shown on a tax-equivalent basis assuming a 35% marginal federal tax rate for all periods. The fully taxable equivalent adjustments for the three months ended
December 31, 2013 and 2012 were $167 thousand and $212 thousand, respectively.
(4) Amounts include Advances from FHLBNY and Securities sold under agreements to repurchase - FHLBNY.
(5) Interest rate spread represents the difference between the average yield on interest-earning assets and the average cost of interest-bearing liabilities.
(6) Net interest margin represents net interest income as a percentage of average interest-earning assets.
SUN BANCORP, INC. AND SUBSIDIARIES
AVERAGE BALANCE SHEETS (Unaudited)
(Dollars in thousands)
For the Year Ended December 31,
-------------------------------
2013 2012
---- ----
Average Income/ Yield/ Average Income/ Yield/
Balance Expense Cost Balance Expense Cost
------- ------- ---- ------- ------- ----
Interest-earning assets:
Loans receivable (1),(2):
Commercial and industrial $1,688,702 $74,191 4.39% $1,814,626 $82,165 4.53%
Home equity 196,597 7,563 3.85 216,218 8,738 4.04
Second mortgage 28,038 1,611 5.75 37,021 2,128 5.75
Residential real estate 312,617 10,846 3.47 207,553 8,199 3.95
Other 28,285 1,961 6.93 35,636 2,477 6.95
------ ----- ------ -----
Total loans receivable 2,254,239 96,172 4.27 2,311,054 103,707 4.49
Investment securities (3) 413,861 8,884 2.15 537,710 12,529 2.33
Interest-earning bank balances 295,199 746 0.25 28,646 68 0.24
------- --- ------ ---
Total interest-earning assets 2,963,299 105,802 3.57 2,877,410 116,304 4.04
--------- ------- ------- -------
Non-interest earning assets:
Cash and due from banks 70,673 73,000
Bank properties and equipment, net 49,357 52,781
Goodwill and intangible assets, net 40,031 43,280
Other assets 101,593 108,299
------- -------
Total non-interest-earning assets 261,654 277,360
------- -------
Total assets $3,224,953 $3,154,770
======== =======
Interest-bearing liabilities:
Interest-bearing deposit accounts:
Interest-bearing demand deposits $1,243,074 $4,228 0.34% $1,225,609 $4,778 0.39%
Savings deposits 268,414 843 0.31 263,307 900 0.34
Time deposits 667,984 6,278 0.94 643,822 7,876 1.22
------- ----- ------- -----
Total interest-bearing deposit 2,179,472 11,349 0.52 2,132,738 13,554 0.64
accounts
Short-term borrowings:
Federal funds purchased 14 - - 5,437 20 0.37
Securities sold under agreements to 1,565 2 0.13 5,157 7 0.14
repurchase - customers
Long-term borrowings:
FHLBNY advances (4) 61,050 1,275 2.09 37,038 898 2.42
Obligations under capital lease 7,468 499 6.68 7,737 513 6.63
Junior subordinated debentures 92,786 2,188 2.36 92,786 2,594 2.80
------ ----- ------ -----
Total borrowings 162,883 3,964 2.43 148,155 4,032 2.72
------- ----- ------- -----
Total interest-bearing liabilities 2,342,355 15,313 0.65 2,280,893 17,586 0.77
--------- ------ ------- ------
Non-interest bearing liabilities:
Non-interest-bearing demand deposits 543,490 499,435
Other liabilities 78,209 80,777
------ ------
Total non-interest bearing liabilities 621,699 580,212
------- -------
Total liabilities 2,964,054 2,861,105
Shareholders' equity 260,899 293,665
------- -------
Total liabilities and shareholders' $3,224,953 $3,154,770
equity
Net interest income $90,489 $98,718
======= =======
Interest rate spread (5) 2.92% 3.27%
==== ====
Net interest margin (6) 3.05% 3.43%
==== ====
Ratio of average interest-earning assets to 126.51% 126.15%
average interest-bearing liabilities
(1) Average balances include non-accrual loans and loans held-for-sale.
(2) Loan fees are included in interest income and the amount is not material for this analysis.
(3) Interest earned on non-taxable investment securities is shown on a tax-equivalent basis assuming a 35% marginal federal tax rate for all periods. The fully taxable equivalent adjustments for the
year ended December 31, 2013 and 2012 were $720 thousand and $870 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
--------------------------
December 31, 2013 September 30, 2013
----------------- ------------------
Average Income/ Yield/ Average Income/ Yield/
Balance Expense Cost Balance Expense Cost
------- ------- ---- ------- ------- ----
Interest-earning assets:
Loans receivable (1),(2):
Commercial and industrial $1,621,222 $17,406 4.29% $1,671,302 $19,205 4.60%
Home equity 190,394 1,853 3.89 194,622 1,892 3.89
Second mortgage 26,142 367 5.62 27,041 384 5.68
Residential real estate 312,977 2,671 3.41 299,667 2,620 3.50
Other 26,134 456 6.98 27,723 475 6.85
------ --- ------ ---
Total loans receivable 2,176,869 22,753 4.18 2,220,355 24,576 4.43
Investment securities(3) 439,788 2,693 2.45 414,189 2,157 2.08
Interest-earning bank balances 342,412 221 0.26 349,386 222 0.25
------- --- ------- ---
Total interest-earning assets 2,959,069 25,667 3.47 2,983,930 26,955 3.61
--------- ------ --------- ------
Non-interest earning assets:
Cash and due from banks 66,662 72,336
Bank properties and equipment, net 49,300 48,590
Goodwill and intangible assets, net 39,190 39,717
Other assets 91,679 120,311
------ -------
Total non-interest-earning assets 246,831 280,954
------- -------
Total assets $3,205,900 $3,264,884
======== ========
Interest-bearing liabilities:
Interest-bearing deposit accounts:
Interest-bearing demand deposits $1,223,184 $960 0.31% $1,263,160 $1,064 0.34%
Savings deposits 268,196 195 0.29 270,394 213 0.32
Time deposits 641,995 1,421 0.89 663,582 1,536 0.93
------- ----- ------- -----
Total interest-bearing deposit 2,133,375 2,575 0.48 2,197,136 2,813 0.51
accounts
Short-term borrowings:
Federal funds purchased 54 - - - - -
Securities sold under agreements to 512 - - 555 - -
repurchase - customers
Long-term borrowings:
FHLBNY advances (4) 60,981 320 2.10 61,011 321 2.10
Obligations under capital lease 7,364 124 6.74 7,435 124 6.67
Junior subordinated debentures 92,786 545 2.35 92,786 550 2.37
------ --- ------ ---
Total borrowings 161,697 989 2.45 161,787 995 2.46
------- --- ------- ---
Total interest-bearing liabilities 2,295,072 3,565 0.62 2,358,923 3,808 0.65
--------- ----- --------- -----
Non-interest bearing liabilities:
Non-interest-bearing demand deposits 585,530 549,684
Other liabilities 68,515 95,576
------ ------
Total non-interest bearing liabilities 654,045 645,260
------- -------
Total liabilities 2,949,117 3,004,183
Shareholders' equity 256,783 260,701
------- -------
Total liabilities and shareholders' $3,205,900 $3,264,884
equity
Net interest income $22,102 $23,147
======= =======
Interest rate spread (5) 2.85% 2.96%
==== ====
Net interest margin (6) 2.99% 3.10%
==== ====
Ratio of average interest-earning assets to 128.93% 126.50%
average interest-bearing liabilities
(1) Average balances include non-accrual loans and loans held-for-sale.
(2) Loan fees are included in interest income and the amount is not material for this analysis.
(3) Interest earned on non-taxable investment securities is shown on a tax-equivalent basis assuming a 35% marginal federal tax rate for all periods. The fully taxable equivalent adjustments for the
three months ended December 31, 2013 and September 30, 2013 were $167 thousand, respectively.
(4) Amounts include Advances from FHLBNY and Securities sold under agreements to repurchase - FHLBNY.
(5) Interest rate spread represents the difference between the average yield on interest-earning assets and the average cost of interest-bearing liabilities.
(6) Net interest margin represents net interest income as a percentage of average interest-earning assets.
SOURCE Sun Bancorp, Inc.
