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Sun Bancorp, Inc. Announces Second Quarter Net Income of $1.5 Million, or $0.08 per Diluted Share; Board of Directors Declares Quarterly Dividend of $0.01

Mittwoch, 26.07.2017 14:50 von PR Newswire

PR Newswire

MOUNT LAUREL, N.J., July 26, 2017 /PRNewswire/ --

Sun Bancorp Logo (PRNewsFoto/Sun Bancorp, Inc.)

Second Quarter Highlights:

  • On June 30, 2017, Sun Bancorp, Inc. announced an agreement to be acquired by OceanFirst Financial Corp. in a stock and cash merger with an aggregate value of approximately $487 million at the time of the announcement.
  • Second quarter 2017 net income of $1.5 million, or $0.08 per diluted share, compared to net income of $1.4 million, or $0.07 per diluted share, in first quarter of 2017.
  • The Company completed the previously announced redemptions of $15 million and $25 million of trust preferred securities on June 30, 2017 and July 23, 2017, respectively.
  • Net interest margin increased by three basis points to 2.96% in the second quarter of 2017 as compared to the first quarter of 2017; The acceleration of $415 thousand of deferred issuance costs for the early trust preferred security redemptions reduced net interest margin by nine basis points.
  • Operating expense control continued with quarterly operating expenses of $16.3 million in the second quarter, which includes $400 thousand of merger-related costs as compared to $17.1 million in the prior-year quarter.
  • Continuation of solid asset quality trends with non-performing loans of $4.4 million at June 30, 2017, which is 0.28% of gross loans and net recoveries of $59 thousand in the second quarter; Recorded a negative provision for loan losses of $831 thousand in the second quarter.
  • Board of Directors declared a dividend of $0.01 per share to holders of record of the common stock of Sun Bancorp, Inc. as of August 22, 2017, payable on September 6, 2017.

Sun Bancorp, Inc. (NASDAQ: SNBC), (the "Company"), the holding company for Sun National Bank (the "Bank"), today reported net income of $1.5 million, or $0.08 per diluted share, for the quarter ended June 30, 2017, compared to net income of $1.4 million, or $0.07 per diluted share, for the quarter ended March 31, 2017, and net income of $3.0 million, or $0.16 per diluted share, for the quarter ended June 30, 2016.

On June 30, 2017, the Company entered into a definitive agreement with OceanFirst Financial Corp. (NASDAQ: OCFC) ("OceanFirst"), pursuant to which the Company will merge with and into OceanFirst with OceanFirst as the surviving entity (the "Merger").  The Merger is expected to close in the first quarter of 2018, subject to each company receiving the required approval of its shareholders, receipt of all required regulatory approvals and other customary closing conditions.

"This quarter was particularly noteworthy for our continued success in managing non-interest expense and our cost of funds, as well as realizing the predicted improvement in the net interest margin," said Thomas M. O'Brien, President & CEO.  "This represents our tenth consecutive profitable quarter, as well as our fifth consecutive quarterly dividend declaration.  This trend of consistently improving our financial performance ultimately culminated with the announcement of the merger agreement with OceanFirst at the end of the quarter.  This strategic partnership represents a milestone for the Company, and recognizes the significant achievements we have made in the last three years.  OceanFirst is an ideal partner whose focus on the community bank business model, geographic markets and business strategies complement those of the Company.  We believe that combining our institutions will create a premier New Jersey community bank that will provide significant value for our shareholders, while also benefiting our customers and the communities that we serve." 

Discussion of Results:

Balance Sheet

Total assets decreased to $2.22 billion at June 31, 2017, as compared to $2.26 billion at both March 31, 2017 and December 31, 2016. Cash and cash equivalents totaled $127.8 million at June 30, 2017, as compared to $128.9 million at March 31, 2017 and $134.2 million at December 31, 2016.  The decrease in cash and cash equivalents during the first six months of 2017 was primarily due to a reduction in brokered and subscription deposits and the redemption of $15 million of trust preferred securities, partially offset by decreases in net loans receivable and investment securities.

Investment securities decreased by $15.6 million to $300.0 million at June 30, 2017 from $315.6 million in the prior linked quarter primarily due to pay downs of $28.9 million and the sale of the remaining collateralized lending obligations portfolio of $13.5 million, partially offset by $26.2 million in purchases of primarily variable rate mortgage-backed securities.

Net loans decreased by $20.2 million to $1.57 billion at June 30, 2017 as compared to $1.59 billion at each of March 31, 2017 and December 31, 2016, due primarily to the decrease in loan origination and refinancing activity in the Commercial Real Estate ("CRE") business during the second quarter of 2017.  As a result of the reduction in originations and refinancing activity, non-owner occupied CRE loans fell by $18.3 million in the second quarter.  Offsetting this decrease, the Bank experienced continued momentum in its Commercial and Industrial ("C&I") business segment.  The C&I segment, which includes owner-occupied CRE and C&I, grew by $9.2 million in the second quarter and has grown 15% annualized in the first half of 2017, due to an increase of $21 million in C&I loans, offset by a decrease of $11.8 million in owner-occupied CRE loans.  Offsetting this growth was continued reductions in residential and home equity loans which fell by $12.0 million in the second quarter as the Bank continued its strategy of not originating new consumer loans.

"Our stated goal of strategically growing the C&I segment continued in this quarter," stated O'Brien.  "Our C&I lending team continues to build momentum throughout the region.  On the CRE segment, we saw slower activity primarily as a result of both higher interest rates as well as continued uncertainty regarding tax reform."

Total deposits decreased to $1.71 billion at June 30, 2017, as compared to $1.73 billion at March 31, 2017 and $1.74 billion at December 31, 2016 due primarily to planned runoff in brokered deposits and subscription deposits.  The cost of deposits increased by one basis point to 40 basis points compared to the prior linked quarter and increased by six basis points as compared to the six months ended June 30, 2016 due to the impact of the recent increase in market interest rates and growth in retail certificates of deposit.  Non-interest deposits rose by $4.5 million to $409.7 million.

"Our ongoing strategy of growing relationship-based deposits continued in the second quarter," stated O'Brien.  "As we reduced our wholesale brokered and other non-relationship deposit accounts, we saw mild growth in our non-interest deposit base.  Despite increasing rates in the external environment, our cost of deposits remains stable and attractive relative to our peers.  We have worked hard to stabilize and grow our deposit portfolio and the related fee income appropriately derived from it."

Net Interest Income and Margin

Net interest income was $14.9 million for the three months ended June 30, 2017, compared to $14.8 million for the three months ended March 31, 2017, and $14.9 million for the three months ended June 30, 2016. The Company's net interest margin was 2.96% for the three months ended June 30, 2017 as compared to 2.93% for three months ended March 31, 2017 and 2.98% for the three months ended June 30, 2016.  During the second quarter, the Bank accelerated $415 thousand of deferred issuance costs related to two tranches of trust preferred securities, totaling $40 million, which were fully redeemed during June and July of 2017.  This acceleration of costs reduced net interest margin by nine basis points in the second quarter of 2017.  Previous external increases in short-term market interest rates provided a lift to the net interest margin due to the asset-sensitive position in the Company's balance sheet.  The cost of deposits rose by one basis point in the quarter to 0.40% while the loan yield rose by eight basis points to 4.05%.  The Company anticipates $1.2 million of annualized savings due to the trust preferred redemptions.

"In recent years, our elevated cash position has suppressed our net interest margin," said O'Brien.  "We believe that the Company deployed excess liquidity prudently with shorter asset durations and emphasized low cost relationship deposit strategies when interest rates were low.  These tactics are now providing a benefit in the net interest margin after the three moves in short-term interest rates since December of 2016.  Once the Company realizes the full benefit of the trust preferred redemptions, the net interest margin will continue to move in a favorable direction."

Non-Interest Income

Non-interest income was $3.0 million for the quarter ended June 30, 2017, as compared to $3.4 million and $3.8 million for the quarters ended March 31, 2017 and June 30, 2016, respectively.  The decrease in non-interest income from the quarter ended March 31, 2017 is due primarily to two loan related fees totaling $550 thousand that were recorded in the first quarter of 2017.  The decrease from the prior year quarter was due to investment sale gains of $426 thousand in the quarter ended June 30, 2016 and higher deposit service charges and fees and investment products income in the prior year quarter. 

Non-Interest Expense

Non-interest expense for the second quarter of 2017 was $16.3 million as compared to $16.1 million for the three months ended March 31, 2017 and $17.1 million for the three months ended June 30, 2016.  The increase in non-interest expense from the prior linked quarter is due primarily to an increase of $580 thousand in professional fees, partially offset by a $300 thousand expense related to an outstanding letter of credit on a previously-sold legacy loan recorded in the first quarter of 2017.  Professional fees in the second quarter of 2017 include $400 thousand of Merger related expenses.  Non-interest expense for the second quarter of 2017 declined by $777 thousand compared to the second quarter of 2016, primarily due to a decrease of $148 thousand in insurance expense as a result of reductions in FDIC assessment rates, a decrease of $367 thousand in salaries and employee benefit expense, a decrease of $117 thousand in problem loan expense, as well as a decrease of $164 thousand in data processing expense due to efficiency gains, partially offset by an increase of $74 thousand related to equipment expenses. The Bank recorded a vacation accrual in the second quarter of 2017 of $461 thousand.  This expense will be reversed in the second half of the year.

"Our ability to manage expenses continues to be a strength at the Company," said O'Brien.  "While we experienced a one-time Merger-related expense in the current quarter of $400 thousand and some other elevated expenses in the second quarter due to a system conversion, we continue to see favorable long-term trends in operating expenses and additional opportunities to reduce operating expenses further in coming quarters."

Asset Quality

Non-performing loans increased by $359 thousand to $4.4 million, or 0.28% of gross loans, at June 30, 2017 from $4.1 million, or 0.25% of gross loans, at March 31, 2017. This increase was primarily due to residential mortgage loans entering non-accrual status during the three months ended June 30, 2017.  Non-performing loans were $5.8 million, or 0.35% of gross loans, at June 30, 2016.

There was a negative provision for loan losses of $831 thousand during the quarter ended June 30, 2017 compared to no provision for loan losses during the quarter ended March 31, 2017 and a negative provision for loan losses of $1.7 million recorded in the second quarter of 2016.  Continued credit strength, limited charge-off activity, net recoveries of $59 thousand and loan pay downs resulted in a reduced reserve need at June 30, 2017.  In the first six months of 2017, the Bank recorded net recoveries of $234 thousand as compared to net charge-offs of $434 thousand in the first six months of 2016.  The allowance for loan losses was $14.9 million, or 0.94% of gross loans at June 30, 2017 as compared to $15.7 million, or 0.98% of gross loans at March 31, 2017 and $16.0 million, or 1.02% of gross loans at June 30, 2016.  The allowance for loan losses was 337% of non-performing loans at June 30, 2017 as compared to 385% of non-performing loans at March 31, 2017 and 289% of non-performing loans at June 30, 2016.

Capital

The Company's capital ratios continue to remain very strong due to positive earnings and a relatively flat balance sheet.  The redemption of trust preferred securities during the second quarter reduced the Company's Tier 2 capital only, and thus only impacted the Company's total risk-based capital ratio.  All capital ratios remain at robust levels and are sufficient to support the Company's strategic plan.  At June 30, 2017, the Bank had a Tier 1 common equity risk-based capital ratio of 18.3%, total risk-based capital ratio of 19.3%, a Tier 1 risk-based capital ratio of 18.3% and a leverage capital ratio of 13.6%. At June 30, 2017, the Company's Tier 1 common equity risk-based capital ratio, total risk-based capital ratio, Tier 1 risk-based capital ratio and leverage capital ratio were 16.2%, 21.4%, 19.7%, and 14.7%, respectively.  The Company's tangible equity to tangible assets ratio was 13.2% at June 30, 2017, as compared to 12.8% at March 31, 2017 and 10.5% at June 30, 2016. 

Dividend Declaration

On July 25, 2017, the Board of Directors of the Company declared a dividend of $0.01 per share to holders of record of the common stock of the Company as of August 22, 2017, payable on September 6, 2017.

"Our primary focus has continued to be delivering value to shareholders," said O'Brien.  "Our regular quarterly dividends reflect our commitment to delivering value to stockholders and our announced transaction with OceanFirst demonstrates our commitment to creating long-term strategic value as well."

Conference Call

The Company will hold a conference call on Wednesday, July 26, 2017 at 11:00 a.m. (EDT) to discuss results and answer questions from analysts and investors. Participants may listen to or participate in the Company's earnings conference call via the following:

  • Participants Toll-Free Number: 888-466-4462
  • Conference ID: 9943940

A transcript of the conference call will be available at the Investor Relations section of www.sunnationalbank.com following the call.

About Sun Bancorp, Inc.

Sun Bancorp, Inc. (NASDAQ: SNBC) is a $2.22 billion asset bank holding company headquartered in Mount Laurel, New Jersey. Its primary subsidiary is Sun National Bank, a community bank serving customers throughout New Jersey, and the metro New York region. Sun National Bank is an Equal Housing Lender and its deposits are insured up to the legal maximum by the FDIC. For more information about Sun National Bank and Sun Bancorp, Inc., visit www.sunnationalbank.com.

Cautionary Note Regarding Forward-Looking Statements

The foregoing material contains forward-looking statements, as defined in the Private Securities Litigation Reform Act of 1995, which may be identified by the use of such words as "allow," "anticipate," "believe," "continues," "could," "estimate," "expect," "intend," "may," "opportunity," "outlook," "plan,"   "potential," "predict," "project," "reflects," "should," "typically," "usually," "view," "will," "would," and similar terms and phrases, including references to assumptions.  Examples of forward-looking statements include, but are not limited to, estimates with respect to the financial condition, results of operations and business of the Company and the Bank, the banking industry, the economy in general, expectations of the business environment in which the Company operates, projections of future performance and other statements contained herein that are not historical facts.  This press release may also contain forward-looking statements about the benefits of the Merger with OceanFirst, including future financial and operating results of OceanFirst, the Company or the combined institution following the Merger, the combined institution's plans, objectives, expectations and intentions, the expected timing of the completion of the Merger, the likelihood of success and other statements that are not historical facts.  These remarks are based upon current management expectations, and may, therefore, involve risks and uncertainties that cannot be predicted or quantified and are beyond the Company's control and are subject to a variety of uncertainties that could cause future results to vary materially from the Company's historical performance, or from current expectations.  Factors that could cause actual results to differ from those expressed or implied by such forward-looking statements include, but are not limited to: (i) delays in closing the Merger and the ability of the Company or OceanFirst to obtain regulatory approvals and meet other closing conditions to the Merger, including receipt of approval from each company's shareholders, (ii) the potential impact of announcement or consummation of the Merger on relationships with third parties, including customers, employees, and competitors, (iii) business disruption following the Merger, (iv) difficulties and delays in integrating the OceanFirst and Company businesses or fully realizing cost savings and other benefits, (v) OceanFirst's potential exposure to unknown or contingent liabilities of the Company, (vi) the Company's ability to attract and retain key management and staff; (vii) changes in business strategy or an inability to successfully execute strategy due to the occurrence of unanticipated events; (viii) the ability to attract deposits and other sources of liquidity; (ix) changes in the financial performance and/or condition of the Bank's borrowers; (x) changes in consumer spending, borrowing and saving habits; (xi) the ability to increase market share and control expenses; (xii) changes in estimates of future loan loss reserve requirements based upon the periodic review thereof under relevant regulatory and accounting requirements; (xiii) local, regional and national economic conditions and events and the impact they may have on the Company and its customers; (xiv) volatility in the credit and equity markets and its effect on the general economy; (xv) the credit risks of lending activities, including changes in the level and trend of loan delinquencies and write-offs; (xvi) the overall quality of the composition of the Company's loan and securities portfolios; (xvii) inflation, interest rate, securities market and monetary fluctuations;(xviii) legislative and regulatory changes, including the Dodd-Frank Wall Street Reform and Consumer Protection Act and the implementing regulations, changes in banking, securities and tax laws and regulations and their application by regulators and changes in the scope and cost of the Federal Deposit Insurance Corporation insurance and other coverages; (xix) the effects of, and changes in, monetary and fiscal policies and laws, including interest rate policies of the Board of Governors of the Federal Reserve System; (xx) competition among providers of financial services; and (xxi) other economic, competitive, governmental, regulatory and technological factors affecting our operations, pricing, products and services and the other risks detailed under the headings "Risk Factors" and "Management's Discussion and Analysis of Financial Condition and Results of Operations" in the Company's Form 10-K for the fiscal year ended December 31, 2016 and in other filings made pursuant to the Securities Exchange Act of 1934, as amended.  No undue reliance should be placed on any forward-looking statements.  The Company does not undertake, and specifically disclaims, any obligation to publicly release the results of any revisions that may be made to any such forward-looking statements to reflect the occurrence of anticipated or unanticipated events or circumstances after the date of such statements.

Additional Information about the Merger and Where to Find it

In connection with the Merger, OceanFirst intends to file a registration statement on Form S-4 with the Securities and Exchange Commission ("SEC"), which includes a joint proxy statement of the Company and OceanFirst and a prospectus of OceanFirst, and each party has and will file other documents regarding the Merger with the SEC.  When available, copies of the definitive joint proxy statement/prospectus will also be sent to Company stockholders seeking any required stockholder approvals.  Before making any voting or investment decision, investors and security holders of the Company are urged to carefully read the entire registration statement and joint proxy statement/prospectus, when they become available, as well as any amendments or supplements to these documents, because they will contain important information about the proposed transaction. The documents filed by OceanFirst and the Company with the SEC may be obtained free of charge at the SEC's website at www.sec.gov. In addition, the documents filed by OceanFirst may be obtained free of charge at OceanFirst's website at www.oceanfirstonline.com and the documents filed by the Company may be obtained free of charge at the Company's website at www.sunnationalbank.com.  Alternatively, these documents, when available, can be obtained free of charge from OceanFirst upon written request to OceanFirst Financial Corp., Attn: Christopher D. Maher, 975 Hooper Avenue, Toms River, New Jersey 08753, or upon written request to Sun Bancorp, Inc., Attn: Janice M. Clark, Corporate Secretary, 350 Fellowship Road, Suite 101, Mount Laurel, NJ 08054.

OceanFirst, the Company, their directors, executive officers and certain other persons may be deemed to be participants in the solicitation of proxies from OceanFirst's and the Company's stockholders in favor of the approval of the Merger. Information about the directors and executive officers of OceanFirst and their ownership of OceanFirst common stock is set forth in the proxy statement for OceanFirst's 2017 annual meeting of stockholders, as previously filed with the SEC on April 26, 2017.  Information about the directors and executive officers of the Company and their ownership of Company common stock is set forth in the Company's proxy statement for the Company's 2017 annual meeting of stockholder as previously filed with the SEC on March 30, 2017.  Stockholders may obtain additional information regarding the interests of such participants in the Merger by reading the registration statement and the proxy statement/prospectus when they become available.

Non-GAAP Financial Measures (Unaudited)

This news release references tangible book value per common share and return on average tangible equity, which are non-GAAP financial measures. Management believes that tangible book value per common share and return on average tangible equity are meaningful financial measures because they are two of the measures we use to assess capital adequacy.

Tangible book value per common share (dollars in thousands)

The following reconciles shareholders' equity to tangible equity by reducing shareholders' equity by the intangible asset balance at June 30, 2017, March 31, 2017, December 31, 2016, September 30, 2016 and June 30, 2016.

 



June

30, 2017



March

31, 2017



December

31, 2016



September

30, 2016



June

30, 2016


Tangible book value per common share:





















Shareholders' equity


$

325,060



$

322,816



$

319,709



$

265,878



$

264,172


Less: Intangible assets



38,188




38,188




38,188




38,188




38,188


Tangible equity


$

286,872



$

284,628



$

281,521



$

227,690



$

225,984


Common stock



19,134




19,132




19,031




19,026




19,026


Less: Treasury stock



73




75




108




138




172


Total outstanding shares



19,061




19,057




18,923




18,888




18,854


Tangible book value per common share:


$

15.05



$

14.94



$

14.88



$

12.05



$

11.99


 

Return on Average Tangible Equity (dollars in thousands)

The following provides the calculation of return on tangible equity for the three months ended June 30, 2017, March 31, 2017, December 31, 2016, September 30, 2016 and June 30, 2016.



Three Months Ended




June

30, 2017



March

31, 2017



December

31, 2016



September

30, 2016



June

30, 2016


Net income


$

1,455



$

1,430



$

56,000



$

1,630



$

2,963


Average tangible equity:





















Average shareholders' equity


$

325,919



$

323,258



$

267,542



$

266,931



$

262,517


Less: Average intangible assets



38,188




38,188




38,188




38,188




38,188


Average tangible equity


$

287,731



$

285,070



$

229,354



$

228,743



$

224,329


Return on average tangible equity(1):



2.0

%



2.0

%



97.7

%



2.9

%



5.3

%


(1)           Annualized

 

SUN BANCORP, INC AND SUBSIDIARIES
FINANCIAL HIGHLIGHTS (Unaudited)
(Dollars in thousands, except share and per share amounts)




For the Three Months Ended



For the Six Months Ended




June 30,



June 30,




2017



2016



2017



2016


Profitability for the period:

















Net interest income


$

14,863



$

14,872



$

29,635



$

29,358


(Recovery of) provision for loan losses



(831)




(1,682)




(831)




(1,682)


Non-interest income



3,000




3,774




6,431




6,936


Non-interest expense



16,289




17,066




32,351




33,590


Income before income taxes



2,405




3,262




4,546




4,386


Income tax expense (benefit)



950




299




1,661




598


Net income available to common shareholders


$

1,455



$

2,963



$

2,885



$

3,788


Financial ratios:

















Return on average assets (1)



0.3

%



0.5

%



0.3

%



0.2

%

Return on average equity (1)



1.8

%



4.5

%



1.8

%



5.8

%

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



2.0

%



5.3

%



2.0

%



6.8

%

Net interest margin (1)



2.96

%



2.98

%



2.94

%



2.94

%

Efficiency ratio



91

%



92

%



90

%



93

%

Income per common share:

















Basic


$

0.08



$

0.16



$

0.15



$

0.20


Diluted


$

0.08



$

0.16



$

0.15



$

0.20



















Average equity to average assets



14.6

%



12.0

%



14.5

%



12.0

%




















June 30,



December 31,








2017



2016




2016






At period-end:

















Total assets


$

2,216,802



$

2,186,982



$

2,262,262






Total deposits



1,708,253




1,713,665




1,741,363






Loans receivable, net of allowance for loan losses



1,574,167




1,548,593




1,594,377






Loans held-for-sale






540









Investments



299,987




296,714




311,727






Borrowings



91,396




92,011




91,708






Junior subordinated debentures



77,322




92,786




92,786






Shareholders' equity



325,060




264,172




319,709























Credit quality and capital ratios:

















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



0.94

%



1.02

%



0.97

%





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



0.28

%



0.35

%



0.19

%





Non-performing assets to total assets



0.20

%



0.27

%



0.14

%





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



337

%



289

%



501

%





Tier 1 common equity risk-based capital:

















Sun Bancorp, Inc.



16.2

%



14.3

%



16.0

%





Sun National Bank



18.3

%



18.1

%



18.9

%





Total risk-based capital:

















Sun Bancorp, Inc.



21.4

%



21.0

%



21.6

%





Sun National Bank



19.3

%



19.1

%



19.8

%





Tier 1 risk-based capital:

















Sun Bancorp, Inc.



19.7

%



17.9

%



18.9

%





Sun National Bank



18.3

%



18.1

%



18.9

%





Leverage capital:

















Sun Bancorp, Inc.



14.7

%



13.2

%



14.6

%





Sun National Bank



13.6

%



13.3

%



14.5

%






















Book value per common share


$

17.05



$

14.01



$

16.90






Tangible book value per common share


$

15.05



$

11.99



$

14.88








(1)

Annualized.

(2)

Return on average tangible equity, a non-GAAP measure, is computed by dividing annualized net income for the period by average tangible equity. Average tangible equity equals average equity less average identifiable intangible assets and goodwill.

(3)

June 30, 2017 capital ratios are estimated, subject to regulatory filings.

 

SUN BANCORP, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION (Unaudited)
(Dollars in thousands, except share and per share amounts)




June 30,



December 31,




2017



2016


ASSETS









Cash and due from banks


$

22,086



$

19,645


Interest earning bank balances



105,745




114,563


Cash and cash equivalents



127,831




134,208


Restricted cash



1,000




5,000


Investment securities available for sale (amortized cost of $285,854 and $300,028 at
  
 June 30, 2017 and December 31, 2016, respectively)



282,598




295,686


Investment securities held to maturity (estimated fair value of $250 at
   
June 30, 2017 and December 31, 2016)



250




250


Loans receivable (net of allowance for loan losses of $14,945 and $15,541 at
   June 30, 2017 and December 31, 2016, respectively)



1,574,167




1,594,377


Restricted equity investments, at cost



17,139




15,791


Bank properties and equipment, net



28,962




30,148


Accrued interest receivable



4,944




5,122


Goodwill



38,188




38,188


Bank owned life insurance (BOLI)



84,081




83,109


Deferred taxes, net



49,442




51,573


Other assets



8,200




8,810


Total assets


$

2,216,802



$

2,262,262


LIABILITIES AND SHAREHOLDERS' EQUITY









Liabilities:









Deposits


$

1,708,253



$

1,741,363


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



85,317




85,416


Obligations under capital lease



6,079




6,292


Junior subordinated debentures



77,322




92,786


Other liabilities



14,771




16,696


Total liabilities



1,891,742




1,942,553











Commitments and contingencies


















Shareholders' equity:









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







Common stock, $5 par value, 40,000,000 shares authorized; 19,133,815 shares issued and
19,060,593 shares outstanding at June 30, 2017; 19,030,704 shares issued and 18,922,726
shares outstanding at December 31, 2016.



95,669




95,154


Additional paid-in capital



509,124




508,593


Retained deficit



(273,997)




(276,501)


Accumulated other comprehensive loss



(1,926)




(2,568)


Deferred compensation plan trust



(1,258)




(1,160)


Treasury stock at cost, 73,222 shares at June 30, 2017 and 107,978 shares at
December 31, 2016.



(2,552)




(3,809)


Total shareholders' equity



325,060




319,709


Total liabilities and shareholders' equity


$

2,216,802



$

2,262,262


 

 

SUN BANCORP, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS (Unaudited)
(Dollars in thousands, except share and per share amounts)




For the Three Months Ended



For the Six Months Ended




June 30,



June 30,




2017



2016



2017



2016


INTEREST INCOME:

















Interest and fees on loans


$

16,224



$

15,666



$

31,897



$

30,697


Interest on taxable investment securities



1,797




1,618




3,582




3,298


Dividends on restricted equity investments



230




214




468




437


Total interest income



18,251




17,498




35,947




34,432


INTEREST EXPENSE:

















Interest on deposits



1,693




1,456




3,379




2,748


Interest on funds borrowed



534




542




1,065




1,086


Interest on junior subordinated debentures



1,161




628




1,868




1,240


Total interest expense



3,388




2,626




6,312




5,074


Net interest income



14,863




14,872




29,635




29,358


(RECOVERY OF) PROVISION FOR LOAN LOSSES



(831)




(1,682)




(831)




(1,682)


Net interest income after provision for loan losses



15,694




16,554




30,466




31,040


NON-INTEREST INCOME:

















Deposit service charges and fees



1,367




1,618




2,769




3,198


Interchange fees



510




486




977




970


Investment products income



327




538




611




914


BOLI income



488




489




972




997


Other income



308




643




1,102




857


Total non-interest income



3,000




3,774




6,431




6,936


NON-INTEREST EXPENSE:

















Salaries and employee benefits



8,966




9,333




17,848




18,396


Occupancy expense



2,252




2,144




4,602




4,482


Equipment expense



1,142




1,068




2,299




2,159


Data processing expense



911




1,075




1,930




2,263


Professional fees



1,116




537




1,652




1,008


Insurance expense



408




556




803




1,344


Advertising expense



346




393




659




775


Problem loan expense



70




187




204




220


Other expense



1,078




1,773




2,354




2,943


Total non-interest expense



16,289




17,066




32,351




33,590


INCOME BEFORE INCOME TAXES



2,405




3,262




4,546




4,386


INCOME TAX EXPENSE



950




299




1,661




598


NET INCOME AVAILABLE TO COMMON

   SHAREHOLDERS


$

1,455



$

2,963



$

2,885



$

3,788



















Basic earnings per share


$

0.08



$

0.16



$

0.15



$

0.20


Diluted earnings per share


$

0.08



$

0.16



$

0.15



$

0.20



















Weighted average shares - basic



19,059,626




18,848,236




19,023,024




18,793,987


Weighted average shares - diluted



19,191,294




18,957,201




19,149,326




18,889,561


 

 

SUN BANCORP, INC. AND SUBSIDIARIES
HISTORICAL TRENDS IN QUARTERLY FINANCIAL DATA (Unaudited)
(dollars in thousands)





2017



2017



2016



2016



2016






Q2



Q1



Q4



Q3



Q2



Profitability for the quarter:























Net interest income



$

14,863



$

14,772



$

14,834



$

14,712



$

14,872



(Recovery of) provision for loan losses




(831)













(1,682)



Non-interest income




3,000




3,431




3,311




3,142




3,774



Non-interest expense




16,289




16,062




15,425




15,937




17,066



Income before income taxes




2,405




2,141




2,720




1,917




3,262



Income tax expense (benefit)




950




711




(53,280)




287




299



Net income available to common shareholders



$

1,455



$

1,430



$

56,000



$

1,630



$

2,963



Financial ratios:























Return on average assets (1)




0.3

%



0.3

%



10.2

%



0.3

%



0.5

%


Return on average equity (1)




1.8

%



1.8

%



83.7

%



2.4

%



4.5

%


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




2.0

%



2.0

%



97.7

%



2.9

%



5.3

%


Net interest margin (1)




2.96

%



2.93

%



2.93

%



2.94

%



2.98

%


Efficiency ratio




91

%



88

%



85

%



89

%



93

%


Per share data :























Income per common share:























Basic



$

0.08



$

0.08



$

2.96



$

0.09



$

0.16



Diluted



$

0.08



$

0.07



$

2.94



$

0.09



$

0.16



Book value



$

17.05



$

16.94



$

16.90



$

14.08



$

14.01



Tangible book value



$

15.05



$

14.94



$

14.88



$

12.05



$

11.99



Cash dividends paid



$

0.01



$

0.01



$

0.01



$



$



Average basic shares




19,059,626




18,986,015




18,908,688




18,874,577




18,848,236



Average diluted shares




19,191,294




19,107,226




19,016,188




18,962,740




18,957,201



Non-interest income:























Deposit service charges and fees



$

1,367



$

1,402



$

1,484



$

1,540



$

1,618



Interchange fees




510




467




483




451




486



Gain on sale of investment securities
















426



Gain on sale of loans










60




41






Investment products income




327




284




288




505




538



BOLI income




488




484




452




485




489



Other income




308




794




544




120




217



Total non-interest income



$

3,000



$

3,431



$

3,311



$

3,142



$

3,774



Non-interest expense:























Salaries and employee benefits



$

8,966



$

8,882



$

7,926



$

8,649



$

9,333



Occupancy expense




2,252




2,350




2,232




2,273




2,144



Equipment expense




1,142




1,157




1,324




1,303




1,068



Data processing expense




911




1,019




1,124




1,116




1,075



Professional fees




1,116




536




508




730




537



Insurance expense




408




395




368




452




556



Advertising expense




346




313




473




412




393



Problem loan expenses




70




134




61




131




187



Other expenses




1,078




1,276




1,409




871




1,773



Total non-interest expense



$

16,289



$

16,062



$

15,425



$

15,937



$

17,066





(1)

Annualized.

(2)

Return on average tangible equity, a non-GAAP measure, is computed by dividing annualized net income for the period by average tangible equity. Average tangible equity equals average equity less average identifiable intangible assets and goodwill.

 

SUN BANCORP, INC. AND SUBSIDIARIES
HISTORICAL TRENDS IN QUARTERLY FINANCIAL DATA (Unaudited)
(dollars in thousands)




2017



2017



2016



2016



2016




Q2



Q1



Q4



Q3



Q2


Balance Sheet at quarter end:





















Cash and cash equivalents


$

127,831



$

128,892



$

134,208



$

156,292



$

168,799


Restricted cash



1,000




1,000




5,000




5,000




5,000


Investment securities



299,987




315,558




311,727




308,031




296,714


Loans held-for-investment





















Commercial and industrial



251,346




230,306




235,946




226,493




220,609


Commercial real estate - owner occupied



250,164




261,971




231,348




226,165




225,520


Commercial real estate - non-owner occupied



710,831




729,102




742,662




676,323




666,345


Land and development



67,042




67,336




67,165




84,692




82,018


Residential real estate



196,157




205,573




210,874




226,691




237,080


Home equity and other



113,572




116,187




121,923




126,302




132,912


Total loans



1,589,112




1,610,475




1,609,918




1,566,666




1,564,484


Allowance for loan losses



(14,945)




(15,716)




(15,541)




(15,827)




(15,891)


Net loans held-for-investment



1,574,167




1,594,759




1,594,377




1,550,839




1,548,593


Loans held-for-sale












1,450




540


Goodwill



38,188




38,188




38,188




38,188




38,188


Total assets



2,216,802




2,255,773




2,262,262




2,189,346




2,186,982


Net deferred tax asset, before valuation allowance



123,107




125,238




124,574




125,051




126,744


Deferred tax valuation allowance



(73,665)




(73,665)




(127,973)




(128,362)




(129,248)


Total deposits



1,708,253




1,733,989




1,741,363




1,717,634




1,713,665


Advances from the FHLBNY



85,317




85,367




85,416




85,465




85,513


Obligations under capital leases



6,079




6,187




6,292




6,396




6,498


Junior subordinated debentures



77,322




92,786




92,786




92,786




92,786


Total shareholders' equity



325,060




322,816




319,709




265,878




264,172























Quarterly average balance sheet:





















Loans held-for-investment





















Commercial


$

1,288,517



$

1,270,543



$

1,238,749



$

1,215,135



$

1,197,368


Residential real estate



202,659




209,500




220,502




233,277




240,884


Home equity and other



114,330




117,963




122,290




128,078




136,330


Total loans



1,605,506




1,598,006




1,581,541




1,576,490




1,574,582


Securities and other interest-earning assets



405,240




417,171




442,409




425,042




422,667


Total interest-earning assets



2,010,746




2,015,177




2,023,950




2,001,532




1,997,249


Total assets



2,231,978




2,240,787




2,201,886




2,187,482




2,179,400


Non-interest-bearing demand deposits



409,694




402,949




411,728




402,465




393,922


Total deposits



1,707,873




1,717,848




1,731,312




1,709,863




1,707,574


Total interest-bearing liabilities



1,482,256




1,499,303




1,504,138




1,492,139




1,498,510


Total shareholders' equity



325,919




323,258




267,542




266,931




262,517


 

 

SUN BANCORP, INC. AND SUBSIDIARIES
HISTORICAL TRENDS IN QUARTERLY FINANCIAL DATA (Unaudited)
(dollars in thousands)




2017



2017



2016



2016



2016




Q2



Q1



Q4



Q3



Q2























Capital and credit quality measures:





















Tier 1 common equity risk-based capital:





















Sun Bancorp, Inc.



16.2

%



15.8

%



16.0

%



14.5

%



14.3

%

Sun National Bank



18.3

%



17.8

%



18.9

%



18.3

%



18.1

%

Total risk-based capital:





















Sun Bancorp, Inc.



21.4

%



21.9

%



21.6

%



21.2

%



21.0

%

Sun National Bank



19.3

%



18.8

%



19.8

%



19.3

%



19.1

%

Tier 1 risk-based capital:





















Sun Bancorp, Inc.



19.7

%



19.2

%



18.9

%



18.1

%



17.9

%

Sun National Bank



18.3

%



17.8

%



18.9

%



18.3

%



18.1

%

Leverage capital:





















Sun Bancorp, Inc.



14.7

%



14.5

%



14.6

%



13.3

%



13.2

%

Sun National Bank



13.6

%



13.4

%



14.5

%



13.4

%



13.3

%











































Average equity to average assets



14.6

%



14.4

%



12.2

%



12.2

%



12.0

%

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



0.94

%



0.98

%



0.97

%



1.01

%



1.02

%

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



0.28

%



0.25

%



0.19

%



0.42

%



0.35

%

Non-performing assets to total assets



0.20

%



0.18

%



0.14

%



0.31

%



0.27

%

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



337

%



385

%



501

%



238

%



289

%

Other data:





















Net recoveries (charge-offs)



59




175




(285)




(65)




(378)


Classified loans



7,979




7,752




6,887




8,593




9,310


Classified assets



11,185




10,958




10,094




11,799




12,516


Non-performing assets:





















Non-accrual loans



2,934




2,682




1,697




3,246




2,580


Non-accrual loans held-for-sale












178




332


Troubled debt restructurings, non-accrual



1,502




1,395




1,404




3,396




2,918


Total non-performing assets


$

4,436



$

4,077



$

3,101



$

6,820



$

5,830




(1)

 June 30, 2017 capital ratios are estimated, subject to regulatory filings.

 

SUN BANCORP, INC. AND SUBSIDIARIES
AVERAGE BALANCE SHEETS (Unaudited)
(dollars in thousands)




For the Three Months Ended



For the Three Months Ended





June 30, 2017



June 30, 2016





Average







Average



Average







Average





Balance



Interest



Yield/Cost



Balance



Interest



Yield/Cost



Interest-earning assets:


























Loans receivable (1), (2)


























Commercial


$

1,288,517



$

13,221




4.10


%

$

1,197,368



$

12,141




4.06


%

Home equity and other



114,330




1,271




4.45




136,330




1,431




4.20



Residential real estate



202,659




1,731




3.42




240,884




2,094




3.48



Total loans receivable



1,605,506




16,223




4.04




1,574,582




15,666




3.98



Investment securities



311,935




1,781




2.28




296,811




1,673




2.25



Interest-earning bank balances



93,305




248




1.06




125,856




159




0.51



Total interest-earning assets



2,010,746




18,252




3.63




1,997,249




17,498




3.50





























Total non-interest-earning assets



221,231












182,151











Total assets


$

2,231,977











$

2,179,400











Interest-bearing liabilities:


























Interest-bearing deposit accounts:


























Interest-bearing demand deposit


$

661,415




402




0.24


%

$

700,857




382




0.22


%

Savings deposits



246,895




211




0.34




239,079




192




0.32



Time deposits



389,869




1,081




1.11




373,716




882




0.94



Total interest-bearing deposit accounts



1,298,179




1,694




0.52




1,313,652




1,456




0.44



Long-term borrowings:


























FHLBNY Advances



85,334




430




2.02




85,529




429




2.01



Obligations under capital lease



6,127




105




6.85




6,543




112




6.85



Junior subordinated debentures



92,616




1,161




5.01




92,786




629




2.71



Total borrowings



184,077




1,696




3.69




184,858




1,170




2.53



Total interest-bearing liabilities



1,482,256




3,390




0.91




1,498,510




2,626




0.70



Non-interest-bearing liabilities:


























Non-interest-bearing demand deposits



409,694












393,922











Other liabilities



14,108












24,451











Total non-interest-bearing liabilities



423,802












418,373











Total liabilities



1,906,058












1,916,883





































Shareholders' equity



325,919












262,517











Total liabilities and shareholders' equity


$

2,231,977











$

2,179,400











Net interest income






$

14,862











$

14,872







Interest rate spread (3)











2.72


%










2.80


%

Net interest margin (4)











2.96


%










2.98


%

Ratio of average interest-earning assets

   to average interest-bearing liabilities











136


%










133


%



(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 rate spread represents the difference between the average yield on interest-earning assets and the average cost of interest-bearing liabilities.

(4)

Net interest margin represents net interest income as a percentage of average interest-earning assets.

 

SUN BANCORP, INC. AND SUBSIDIARIES
AVERAGE BALANCE SHEETS (Unaudited)
(dollars in thousands)




For the Six Months Ended



For the Six Months Ended





June 30, 2017



June 30, 2016





Average







Average



Average







Average





Balance



Interest



Yield/Cost



Balance



Interest



Yield/Cost



Interest-earning assets:


























Loans receivable (1), (2)


























Commercial and industrial


$

1,279,580



$

25,838




4.04


%

$

1,178,645



$

23,570




4.00


%

Home equity



116,136




2,529




4.36




139,074




2,928




4.21



Residential real estate



206,061




3,530




3.43




244,168




4,199




3.44



Total loans receivable



1,601,777




31,897




3.98




1,561,887




30,697




3.93



Investment securities (3)



310,108




3,588




2.31




295,963




3,390




2.29



Interest-earning bank balances



101,064




462




0.91




136,965




345




0.50



Total interest-earning assets



2,012,949




35,947




3.57




1,994,815




34,432




3.45





























Total non-interest-earning assets



223,409












182,792











Total assets


$

2,236,358











$

2,177,607











Interest-bearing liabilities:


























Interest-bearing deposit accounts:


























Interest-bearing demand deposits


$

664,268




791




0.24


%

$

706,214



$

741




0.21


%

Savings deposits



243,669




412




0.34




234,102




361




0.31



Time deposits



398,556




2,177




1.09




362,744




1,646




0.91



Total interest-bearing deposit accounts



1,306,493




3,380




0.52




1,303,060




2,748




0.42



Short-term borrowings:


























Repurchase agreements with customers




















Long-term borrowings:


























FHLBNY advances



85,359




853




2.00




85,553




860




2.01



Obligations under capital lease



6,180




212




6.86




6,592




226




6.86



Junior subordinated debentures



92,701




1,868




4.03




92,786




1,240




2.67



Total borrowings



184,240




2,933




3.18




184,931




2,326




2.52



Total interest-bearing liabilities



1,490,733




6,313




0.85




1,487,991




5,074




0.68



Non-interest-bearing liabilities:


























Non-interest-bearing demand deposits



406,340












405,630











Other liabilities



14,689












23,042











Total non-interest-bearing liabilities



421,029












428,672











Total liabilities



1,911,762












1,916,663





































Shareholders' equity



324,596












260,944











Total liabilities and shareholders' equity


$

2,236,358











$

2,177,607











Net interest income






$

29,634











$

29,358







Interest rate spread (4)











2.72


%










2.77


%

Net interest margin (5)











2.94


%










2.94


%

Ratio of average interest-earning assets

   to average interest-bearing liabilities











135


%










134


%



(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 rate spread represents the difference between the average yield on interest-earning assets and the average cost of interest-bearing liabilities.

(4)

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



For the Three Months Ended





June 30, 2017



March 31, 2017





Average







Average



Average







Average





Balance



Interest



Yield/Cost



Balance



Interest



Yield/Cost



Interest-earning assets:


























Loans receivable (1), (2)


























Commercial


$

1,288,517



$

13,221




4.10


%

$

1,270,543



$

12,617




3.97


%

Home equity and other



114,330




1,271




4.45




117,963




1,258




4.27



Residential real estate



202,659




1,731




3.42




209,500




1,799




3.43



Total loans receivable



1,605,506




16,223




4.04




1,598,006




15,674




3.92



Investment securities



311,935




1,781




2.28




308,261




1,807




2.34



Interest-earning bank balances



93,305




248




1.06




108,910




215




0.79



Total interest-earning assets



2,010,746




18,252




3.63




2,015,177




17,696




3.51





























Total non-interest-earning assets



221,232












225,610











Total assets


$

2,231,978











$

2,240,787











Interest-bearing liabilities:


























Interest-bearing deposit accounts:


























Interest-bearing demand deposits


$

661,415




402




0.24


%

$

667,152



$

389




0.23


%

Savings deposits



246,895




211




0.34




240,407




201




0.33



Time deposits



389,869




1,081




1.11




407,340




1,096




1.08



Total interest-bearing deposit accounts



1,298,179




1,694




0.52




1,314,899




1,686




0.51



Long-term borrowings:


























FHLB advances



85,334




430




2.02




85,384




424




1.99



Obligations under capital lease



6,127




105




6.85




6,234




107




6.87



Junior subordinated debentures



92,616




1,161




5.01




92,786




707




3.05



Total borrowings



184,077




1,696




3.69




184,404




1,238




2.69



Total interest-bearing liabilities



1,482,256




3,390




0.91




1,499,303




2,924




0.78



Non-interest-bearing liabilities:


























Non-interest-bearing demand deposits



409,694












402,949











Other liabilities



14,108












15,277











Total non-interest-bearing liabilities



423,802












418,226











Total liabilities



1,906,058












1,917,529





































Shareholders' equity



325,919












323,258











Total liabilities and shareholders' equity


$

2,231,977











$

2,240,787











Net interest income






$

14,862











$

14,772







Interest rate spread (3)











2.72


%










2.73


%

Net interest margin (4)











2.96


%










2.93


%

Ratio of average interest-earning assets

   to average interest-bearing liabilities











136


%










134


%





























(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 rate spread represents the difference between the average yield on interest-earning assets and the average cost of interest-bearing liabilities.

(4)

Net interest margin represents net interest income as a percentage of average interest-earning assets.

 

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SOURCE Sun Bancorp, Inc.