Sun Bancorp Net Income Increases 28% Over Linked Quarter;
Initiatives to Improve Profitability and Reduce Overhead Drive Results
Our mission is uncompromising…
…to be the Premier Community Bank in every community we serve
VINELAND, NJ, October 16, 2006 - Sun Bancorp, Inc. (NASDAQ:SNBC) today reported net income of $4.9 million, or $.23 per share, for the quarter ended September 30, 2006, compared to net income of $5.0 million, or $.25 per share, for the third quarter of 2005, and $3.8 million, or $.18 per share, for the linked second quarter of 2006. Earnings per share data is adjusted for the 5% common stock dividend declared in April 2006 and paid on May 18, 2006.
For the nine months ended September 30, 2006, the Company reported net income of $12.8 million, or $.60 per share, compared to $14.9 million, or $.73 per share, in the prior period.
“We are pleased with our financial performance for the quarter, in which the impact of several of our previously announced profitability enhancement initiatives is reflected in our record low efficiency ratio of 71.3%. The trend is moving in the right direction,” said Thomas A. Bracken, president and chief executive officer of Sun Bancorp, Inc. and its wholly owned subsidiary Sun National Bank.
“During the quarter, we made significant progress in the continuing transformation of our retail franchise. We completed the previously announced retail banking consulting initiatives with Ms. Anat Bird and successfully concluded our national search for a senior retail executive, as Jeffrey P. Hawkins joined Sun in early September as executive vice president of Retail Banking.”
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Sun Bancorp 3Q 2006
“Across the broader organization, we will continue to focus on our internal review and assessment of operations, which will lead to further measures during the balance of 2006 to increase revenue and reduce the annualized run rate of overhead expenses,” Bracken said. “Our previously announced sales and consolidation initiative involving five branches is also well underway. Two branches will be consolidated by December 2006 and sales contracts are being finalized for the remaining three branches. We expect that these branch sales will be consummated during the fourth quarter through the early first quarter of 2007.”
Citing key factors driving results during the third quarter, Bracken said that the Company continues to experience good sequential loan growth, positive deposit growth for the quarter, and a net interest margin that increased over the second quarter. Non-interest income is trending favorably and total operating expenses decreased 7.5% over the linked second quarter.
“The overall credit quality trends remain stable, although non-performing assets increased modestly over the linked second quarter,” Bracken said. “The Bank is not materially at risk to the two widely publicized problem credits in New Jersey - Dwek and Kara Homes. We have been and remain very prudent in our credit underwriting standards in this highly competitive banking environment and our exposures, particularly in the homebuilding industry, are not significant.”
The following is an overview of the key financial highlights for the quarter:
| · | Total assets were $3.264 billion at September 30, 2006, compared to $3.212 billion at June 30, 2006, and $3.105 billion at September 30, 2005. On January 19, 2006, the Company acquired assets of approximately $164 million and recorded purchase adjustments of approximately $23 million from the acquisition of Advantage Bank. |
| · | Total loans before allowance for loan losses were $2.351 billion at September 30, 2006, a growth of 12.3% over December 31, 2005, normalized for Advantage Bank and significant prepayments. The linked quarter growth normalized for loan prepayments during the quarter of $31.0 million was 3.8%. |
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Sun Bancorp 3Q 2006
| · | Total non-performing assets were $14.7 million at September 30, 2006, or .63% of total loans and real estate owned, compared to $13.9 million, or .71% of total loans and real estate owned, at September 30, 2005. On a linked quarter basis, total non-performing assets increased $2.3 million. The allowance for loan losses to total loans is 1.1% at September 30, 2006, compared to 1.08% at June 30, 2006. |
| · | Total deposits were $2.637 billion at September 30, 2006, an increase of $129.3 million, or 5.2%, over deposits at September 30, 2005, and an increase of $50.9 million, or 2.0%, over the linked second quarter. |
| · | Net interest income (tax equivalent basis) for the third quarter of $25.2 million increased $600,000 from the prior year period and remained flat as compared to the linked second quarter. Net interest margin for the quarter of 3.51% compares to 3.45% for the comparable prior year period and 3.48% for the linked second quarter. |
| · | Total operating non-interest income for the quarter of $5.3 million increased 14.2% over the comparable prior year period and increased 3.90% over the linked second quarter. These increases were primarily due to increases in service charge income offset by decreases in derivative income. |
| · | Total operating non-interest expenses for the quarter of $21.5 million increased $311,000, or 1.5%, over the comparable prior year period and decreased $1.8 million, or 7.5%, over the linked second quarter. The increase of $311,000 over the prior year period is mainly due to $722,000 of non-interest expenses attributable to the newly acquired Advantage Bank. The decrease of $1.8 million over the linked second quarter represents principally a decrease in salaries and employee benefits of $1.1 million, resulting primarily from the previously announced profitability enhancement initiatives. |
“Inherent in the third quarter numbers is evidence of the early returns from recent steps we took to implement expense savings. These savings should further ramp up to their full magnitude by early 2007. When combined with the anticipated revenue impact of our enhanced retail initiative, we see an encouraging trend to improved profitability,” said Bracken.
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Sun Bancorp 3Q 2006
The Company will hold a conference call on Tuesday, October 17, 2006 at 11:30 a.m. (ET) to discuss results and answer questions from analysts.
Participants may call 1-800-391-2548 and give the verbal password: vi352014. The conference call also will be Web cast live through the Sun Bancorp Web site at www.sunnb.com. Participants are advised to call in or log on 10 minutes ahead of the scheduled start of the call. An Internet-based replay will be available at the Web site for 48 hours following the call.
Sun Bancorp, Inc. is a multi-state bank holding company headquartered in Vineland, New Jersey. Its primary subsidiary is Sun National Bank, serving customers through 80 branch locations in Southern and Central New Jersey, Philadelphia, PA, and New Castle County, DE. The Bank is an Equal Housing Lender and its deposits are insured up to the legal maximum by the Federal Deposit Insurance Corporation (FDIC). For more information about Sun National Bank and Sun Bancorp, Inc., visit www.sunnb.com.
The foregoing material contains forward-looking statements concerning the financial condition, results of operations and business of the Company. We caution that such statements are subject to a number of uncertainties and actual results could differ materially, and, therefore, readers should not place undue reliance on any forward-looking statements. The Company does not undertake, and specifically disclaims, any obligation to publicly release the results of any revisions that may be made to any forward-looking statements to reflect the occurrence of anticipated or unanticipated events or circumstances after the date of such statements.
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