Sun Bancorp (SNBC) 8-K Sun Bancorp, Inc. Reports Fourth Quarter and Full Year Results for 2007

News Release

For Immediate Release

Contact:  Dan Chila, EVP, Chief Financial Officer (856) 691-7700

Sun Bancorp, Inc. Reports Fourth Quarter and Full Year Results for 2007

VINELAND, NJ, January 22, 2008 – Sun Bancorp, Inc. (NASDAQ:SNBC) today reported net income of $3.9 million, or $.17 per share diluted, for the quarter ended December 31, 2007, compared to net income of $4.5 million, or $.20 per share diluted, for the fourth quarter of 2006. Net income for the fourth quarter 2006 includes pre-tax charges of approximately $1.1 million ($.03 per share) related to two branch consolidations and severance expense.

Net income for the year ended December 31, 2007 was $19.4 million, or $.86 per share, compared to net income of $17.3 million, or $.77 per share diluted, for the prior year. The full-year 2007 results included net-charges of approximately $2.1 million (pre-tax), or $.06 per share. The net charges include $2.4 million of severance and other related expenses, a $915,000 write-off of unamortized issuance costs of redeemed trust preferred securities and early extinguishment of debt charges on FHLB borrowings, and $185,000 of branch consolidation charges.  Offsetting these charges was a pre-tax gain of $1.4 million realized from the sale of three branches. The prior year included approximately $1.6 million (pre-tax), or $.05 per share, in branch rationalization and severance related charges.

“As we closed out 2007 with expectations that the difficult operating environment will continue indefinitely, credit quality is first and foremost on everyone’s mind. Accordingly, during the quarter we charged off $4.8 million of delinquent loans and recorded a $5.4 million loan loss provision to maintain adequate reserve coverage (1.08%).  These charge-offs and loan loss provision exceeded our previously announced levels.  This positions us well for forward progress, when combined with favorable performance trends throughout 2007 for our net interest margin, non-interest income growth and expense control,” said Thomas X. Geisel, president and chief executive officer of Sun Bancorp.  “Our credit risk assessment process is being administered by a seasoned team and we are optimistic that we can maintain loan quality while the lenders produce respectable growth throughout the various segments of the portfolio.”

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Sun Bancorp 4Q 2007 – page two

“During 2007, market conditions enabled us to repurchase 1,010,523 shares of our outstanding common stock, thus completing in late December a plan that authorized the buyback of about 5%, or approximately 1,000,000 shares. Of the total, 467,545 shares were repurchased during the fourth quarter.  The Board subsequently authorized a new stock repurchase plan covering up to approximately 5%, or approximately 1,100,000 additional shares, of common stock to be purchased in the open market or in privately negotiated transactions. We expect to continue to be an active purchaser of our stock as opportunities arise,” said Geisel.

The following is an overview of the key financial highlights:

·   Total assets were $3.338 billion at December 31, 2007, compared to $3.296 billion at September 30, 2007 and $3.326 billion at December 31, 2006.  

·   Total loans before allowance for loan losses were $2.510 billion at December 31, 2007, an increase of $143.3 million, or 6.1% over total loans at December 31, 2006.  Linked quarter loan growth normalized for prepayments of about $39.0 million during the quarter approximated 3.0%. Total loan growth over year end 2006 normalized for prepayments and a branch sale approximates 13.1%.  

·   Total non-performing assets were $29.6 million at December 31, 2007, or 1.18% of total loans and real estate owned, compared to $15.2 million, or .64% of total loans and real estate owned, at December 31, 2006. On a linked quarter basis, total non-performing assets increased $7.5 million. Net charge-offs for the quarter were $4.8 million and the loan loss provision for the quarter was $5.4 million.  The allowance for loan losses to total loans is 1.08% at December 31, 2007, compared to 1.08% at December 31, 2006 and 1.06% at September 30, 2007.  

·   Total deposits were $2.699 billion at December 31, 2007, an increase of $31.1 million, or 1.2% over deposits at December 31, 2006. On average, total deposits increased 3.8 % year-to-year. Total deposits increased approximately 1% over the linked quarter.  

·   Net interest income (tax-equivalent basis) of $26.2 million for the quarter compares to $24.8 million for the comparable prior year period and $25.8 million for the linked third quarter. The net interest margin for the quarter of 3.52% compares to 3.37% for the comparable prior year period and 3.49% for the linked third quarter. The linked quarter margin improvement reflects a net spread increase of 12 basis points. This increase is due to a decrease of 25 basis points in the cost of interest- bearing liabilities offset by a decrease in yield on earning assets of 13 basis points.  

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Sun Bancorp 4Q 2007 – page three

·   Total operating non-interest income for the quarter of $6.5 million increased $1.1 million, or 21.3% over the comparable prior year period and increased $471,000, or 7.8% over the linked third quarter. The increase over the prior year period was attributable to increases in service charges on deposit accounts of $238,000, an increase in net gain on derivative instruments of $311,000 and an increase in BOLI income of $585,000. The increase over the linked quarter was primarily related to an increase in BOLI income of $506,000, an increase in gain on derivative instruments of $214,000 offset partially by a decrease in service charges on deposit accounts of $164,000. During the quarter, the Company completed a conversion of approximately $40.4 million of its existing general account BOLI to a new separate account policy. The net conversion cost for this transaction resulted in the recognition of $301,000 in BOLI income and $416,000 in federal income tax expense for the quarter. Total operating non-interest income for the year 2007 of $24.4 million increased $4.3 million, or 21.2% over 2006. The primary increases were related to an increase in service charges on deposit accounts of $2.6 million, an increase in gain on derivative instruments of $389,000, an increase in BOLI income of $684,000 and an increase in gain on sale of loans of $562,000.  Total operating non-interest income for the year 2007 represents approximately 20.0% of total revenue compared to 2006 at approximately 17.0%.  

·   Total operating non-interest expenses for the quarter of $21.5 million increased $374,000, or 1.8% over the comparable prior year period. The primary increase is FDIC insurance expense which increased over the prior period by $392,000 due to the FDIC reform legislation effective for 2007. Total operating non-interest expense decreased approximately 1.0% over the linked third quarter. Total operating non-interest expenses for the year of $86.3 million decreased $1.9 million, or 2.2% over the prior year. The full year impact of increased FDIC insurance expense over the prior year was $971,000. The efficiency ratio for the quarter of 66.61% compares to the comparable prior year period efficiency ratio of 74.06%. The efficiency ratio has continued to trend favorably each quarter of 2007. The efficiency ratio for the year, excluding the non-operating income and expenses items previously noted, is 69.37% and compares to the prior year on the same basis, at 73.97%. This continues to reflect the Company’s focus on ongoing profitability enhancement initiatives with particular emphasis on expense efficiency savings.  

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Sun Bancorp 4Q 2007 – page four

The Company will hold its regular quarterly conference call on Wednesday, January 23, 2008 at 9:30 a.m. (ET). Participants may call 1-800-391-2548 and give the verbal password: vi36443. The conference call also will be Web cast live through the Sun Bancorp Web site at www.sunnb.com. Participants are advised to call in or log on 10 minutes ahead of the scheduled start of the call. An Internet-based replay will be available at the Web site for two weeks following the call.

Sun Bancorp, Inc. is a multi-state bank holding company headquartered in Vineland, New Jersey. Its primary subsidiary is Sun National Bank, serving customers through 70 branch locations in Southern and Central New Jersey and New Castle County, Delaware. The Bank is an Equal Housing Lender and its deposits are insured up to the legal maximum by the Federal Deposit Insurance Corporation (FDIC). For more information about Sun National Bank and Sun Bancorp, Inc., visit www.sunnb.com.

The foregoing material contains forward-looking statements concerning the financial condition, results of operations and business of the Company. We caution that such statements are subject to a number of uncertainties and actual results could differ materially, and, therefore, readers should not place undue reliance on any forward-looking statements. The Company does not undertake, and specifically disclaims, any obligation to publicly release the results of any revisions that may be made to any forward-looking statements to reflect the occurrence of anticipated or unanticipated events or circumstances after the date of such statements.

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SUN BANCORP, INC. AND SUBSIDIARIES

FINANCIAL HIGHLIGHTS (unaudited)

(Dollars in thousands, except per share data)

	For the Three Months Ended						For the Years Ended
	December 31,						December 31,
	2007			2006			2007			2006
Profitability for the period:
Net interest income	$	25,838		$	24,545		$	99,176		$	99,078
Provision for loan losses		5,443			990			8,403			3,807
Non-interest income		6,482			5,012			25,815			19,746
Non-interest expense		21,528			21,889			88,963			89,393
Income before income taxes		5,349			6,678			27,625			25,624
Net income	$	3,870		$	4,454		$	19,352		$	17,274
Financial ratios:
Return on average assets (1)		0.47	%		0.54	%		0.58	%		0.53	%
Return on average equity (1)		4.26	%		5.24	%		5.45	%		5.28	%
Return on average tangible equity (1),(2)		7.33	%		9.78	%		9.61	%		10.15	%
Net interest margin (1)		3.52	%		3.37	%		3.38	%		3.44	%
Efficiency ratio		66.61	%		74.06	%		71.18	%		75.23	%
Efficiency ratio, excluding non-operating income and non-operating expense (3)		66.61	%		70.78	%		69.37	%		73.97	%
Earnings per common share (4):
Basic	$	0.18		$	0.21		$	0.89		$	0.81
Diluted	$	0.17		$	0.20		$	0.86		$	0.77
Average equity to average assets		10.93	%		10.34	%		10.72	%		10.09	%

	December 31,
	2007			2006
At period-end:
Total assets	$	3,338,392		$	3,325,563
Total deposits		2,699,091			2,667,997
Loans receivable, net of allowance for loan losses		2,482,917			2,340,965
Investments		461,639			525,122
Borrowings		154,213			160,622
Junior subordinated debentures		97,941			108,250
Shareholders’ equity		362,177			342,227
Credit quality and capital ratios:
Allowance for loan losses to gross loans		1.08	%		1.08	%
Non-performing assets to gross loans and real estate owned		1.18	%		0.64	%
Allowance for loan losses to non-performing loans		95.77	%		175.50	%
Total capital (to risk-weighted assets) (5)
Sun Bancorp, Inc.		11.93	%		11.89	%
Sun National Bank		11.08	%		10.57	%
Tier 1 capital (to risk-weighted assets) (5)
Sun Bancorp, Inc.		10.95	%		10.91	%
Sun National Bank		10.11	%		9.59	%
Leverage ratio (5)
Sun Bancorp, Inc.		9.67	%		9.40	%
Sun National Bank		8.98	%		8.28	%
Book value	$	16.68		$	15.89
Tangible book value	$	9.71		$	8.62
(1) Amounts for the three months ended are annualized.
(2) Return on average tangible equity is computed by dividing annualized net income for the period by average tangible equity. Average tangible equity equals average equity less average identifiable intangible assets and goodwill.
(3) Efficiency ratio, excluding non-operating income and non-operating expenses, is computed by dividing non-interest expense for the period by the summation of net interest income and non-interest income.  Net interest income for the year ended December 31, 2007 excludes the write-off of $791,000 of unamortized costs on redeemed trust preferred securities. Non-interest income for the year ended December 31, 2007 excludes a net gain of $1.4 million from the sale of branches as compared to a net loss of $330,000 from the sale of bank property for the same period in 2006.  Non-interest expense for the year ended December 31, 2007 excludes $2.4 million of severance related expenses and $185,000 in branch rationalization charges as compared to $740,000 of severance related expenses and $495,000 in branch rationalization charges for the same period in 2006.  In addition, non-interest expense for the year ended December 31, 2007 excludes $124,000 resulting from the early extinguishment of FHLB borrowing.  Non-interest income for the three months ended December 31, 2006 excludes a net loss of $330,000 from the sale of bank property.   In addition, non-interest expense for the three months ended December 31, 2006 excludes $240,000 in severance related expenses and $495,000 in branch rationalization charges.
(4) Data is adjusted for a 5% stock dividend declared in April 2007.
(5) December 31, 2007 capital ratios are estimated, subject to regulatory filings.

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SUN BANCORP, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION (unaudited)
(Dollars in thousands, except par value)
	December 31,
	2007			2006
ASSETS
Cash and due from banks	$	81,479		$	74,991
Interest-earning bank balances		2,380			48,066
Federal funds sold		2,654			47,043
Cash and cash equivalents		86,513			170,100
Investment securities available for sale  (amortized cost - $427,378 and $488,007 December 31, 2007 and December 31, 2006, respectively)		425,805			481,952
Investment securities held to maturity  (estimated fair value - $18,755 and $24,846 at December 31, 2007 and December 31, 2006, respectively)		18,965			25,441
Loans receivable (net of allowance for loan losses - $27,002 and $25,658 at December 31, 2007 and December 31, 2006, respectively)		2,482,917			2,340,965
Restricted equity investments		16,869			17,729
Bank properties and equipment, net		48,118			42,292
Real estate owned, net		1,449			600
Accrued interest receivable		15,018			14,657
Goodwill		127,894			128,117
Intangible assets, net		23,479			28,570
Deferred taxes, net		3,169			3,939
Bank owned life insurance		72,487			57,370
Other assets		15,709			13,831
Total assets	$	3,338,392		$	3,325,563
LIABILITIES & SHAREHOLDERS’ EQUITY
LIABILITIES
Deposits	$	2,699,091		$	2,667,997
Advances from the Federal Home Loan Bank (FHLB)		63,483			103,560
Federal funds purchased		30,000			-
Securities sold under agreements to repurchase - FHLB		15,000			-
Securities sold under agreements to repurchase - customers		40,472			51,740
Obligation under capital lease		5,258			5,322
Junior subordinated debentures		97,941			108,250
Other liabilities		24,970			46,467
Total liabilities		2,976,215			2,983,336
SHAREHOLDERS’ EQUITY
Preferred stock, $1 par value, 1,000,000 shares authorized, none issued		-			-
Common stock, $1 par value, 50,000,000 shares authorized, 22,722,655 and 20,507,549 issued at December 31, 2007 and December 31, 2006, respectively		22,723			20,508
Additional paid-in capital		336,668			304,857
Retained earnings		20,338			20,794
Accumulated other comprehensive loss		(1,027	)		(3,932	)
Treasury stock at cost, 1,010,523 shares at December 31, 2007		(16,525	)		-
Total shareholders’ equity		362,177			342,227
Total liabilities and shareholders’ equity	$	3,338,392		$	3,325,563

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SUN BANCORP, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME (unaudited)
(Dollars in thousands, except per share data)
	For the Three Months					For the Years
	Ended December 31,					Ended December 31,
	2007		2006			2007		2006
INTEREST INCOME
Interest and fees on loans	$	43,991	$	42,991		$	174,767	$	160,876
Interest on taxable investment securities		4,306		4,252			17,741		19,195
Interest on non-taxable investment securities		728		517			2,818		1,564
Dividends on restricted equity investments		281		282			1,112		1,143
Interest on federal funds sold		86		494			1,725		1,172
Total interest income		49,392		48,536			198,163		183,950
INTEREST EXPENSE
Interest on deposits		20,211		19,802			84,252		66,892
Interest on borrowed funds		1,556		1,997			6,267		9,571
Interest on junior subordinated debentures		1,787		2,192			8,468		8,409
Total interest expense		23,554		23,991			98,987		84,872
Net interest income		25,838		24,545			99,176		99,078
PROVISION FOR LOAN LOSSES		5,443		990			8,403		3,807
Net interest income after provision for loan losses		20,395		23,555			90,773		95,271
NON-INTEREST INCOME
Service charges on deposit accounts		3,421		3,183			13,687		11,117
Other service charges		85		73			307		311
Net gain on sale of branches		-		-			1,443		-
(Loss) gain on sale of bank property & equipment		-		(330	)		12		(330	)
Loss on sale of investment securities		-		(1	)		-		(21	)
Gain on sale of loans		342		463			1,689		1,127
Net gain on derivative instruments		511		200			1,567		1,178
Other		2,123		1,424			7,110		6,364
Total non-interest income		6,482		5,012			25,815		19,746
NON-INTEREST EXPENSE
Salaries and employee benefits		11,004		10,842			45,432		45,079
Occupancy expense		2,830		3,361			11,491		12,136
Equipment expense		1,660		1,970			7,172		7,926
Amortization of intangible expenses		1,177		1,193			4,714		4,767
Data processing expense		1,078		895			4,249		4,283
Advertising expense		459		407			1,856		1,683
Other		3,320		3,221			14,049		13,519
Total non-interest expense		21,528		21,889			88,963		89,393
INCOME BEFORE INCOME TAXES		5,349		6,678			27,625		25,624
INCOME TAXES		1,479		2,224			8,273		8,350
NET INCOME	$	3,870	$	4,454		$	19,352	$	17,274
Basic earnings per share (1)	$	0.18	$	0.21		$	0.89	$	0.81
Diluted earnings per share (1)	$	0.17	$	0.20		$	0.86	$	0.77

(1) Data is adjusted for a 5% stock dividend declared in April 2007.  

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SUN BANCORP, INC. AND SUBSIDIARIES
HISTORICAL TRENDS IN QUARTERLY FINANCIAL DATA (unaudited)
(Dollars in thousands)
	2007			2007			2007			2007			2006
	Q4			Q3			Q2			Q1			Q4
Balance sheet at quarter end:
Loans:
Commercial and industrial	$	2,024,728		$	1,990,027		$	1,985,584		$	1,972,491		$	1,925,103
Home equity		264,965			258,991			245,283			234,982			232,321
Second mortgage		81,063			79,464			79,120			76,449			77,337
Residential real estate		49,750			54,601			47,101			38,798			38,418
Other		89,413			91,094			91,618			93,149			93,444
Total gross loans		2,509,919			2,474,177			2,448,706			2,415,869			2,366,623
Allowance for loan losses		(27,002	)		(26,340	)		(26,079	)		(26,027	)		(25,658	)
Net loans		2,482,917			2,447,837			2,422,627			2,389,842			2,340,965
Goodwill		127,894			127,935			127,936			127,936			128,117
Intangible assets, net		23,479			24,656			25,833			27,011			28,570
Total assets		3,338,392			3,295,576			3,324,633			3,326,681			3,325,563
Total deposits		2,699,091			2,682,286			2,725,747			2,694,304			2,667,997
Advances from the Federal Home Loan Bank (FHLB)		63,483			64,763			66,029			100,481			103,560
Federal funds purchased		30,000			-			-			1,500			-
Securities sold under agreements to repurchase – FHLB		15,000			15,000			-			-			-
Securities sold under agreements to repurchase – customers		40,472			46,499			44,612			42,511			51,740
Obligation under capital lease		5,258			5,275			5,291			5,307			5,322
Junior subordinated debentures		97,941			97,941			97,941			108,250			108,250
Total shareholders’ equity		362,177			361,645			355,758			348,595			342,227
Quarterly average balance sheet:
Loans:
Commercial and industrial	$	2,030,928		$	1,981,778		$	1,978,175		$	1,956,190		$	1,937,580
Home equity		263,245			250,474			240,150			233,837			229,002
Second mortgage		80,400			78,643			77,442			76,167			77,593
Residential real estate		50,734			49,635			39,193			37,710			35,323
Other		87,155			89,566			91,578			92,705			90,358
Total gross loans		2,512,462			2,450,096			2,426,538			2,396,609			2,369,856
Securities and other interest-earning assets		468,418			509,016			577,669			560,574			578,983
Total interest-earning assets		2,980,880			2,959,112			3,004,207			2,957,183			2,948,839
Total assets		3,322,686			3,292,687			3,341,506			3,302,913			3,288,123
Non-interest-bearing demand deposits		434,066			462,173			458,851			458,201			480,339
Total deposits		2,689,326			2,682,879			2,724,554			2,664,668			2,648,713
Total interest-bearing liabilities		2,499,003			2,445,187			2,501,896			2,466,678			2,445,320
Total shareholders' equity		363,302			359,949			353,280			344,717			339,839
Capital and credit quality measures:
Total Capital (to Risk-Weighted Assets)(1):
Sun Bancorp, Inc.		11.93	%		11.97	%		11.80	%		11.98	%		11.89	%
Sun National Bank		11.08	%		11.06	%		10.74	%		10.64	%		10.57	%
Tier I Capital (to Risk-Weighted Assets)(1):
Sun Bancorp, Inc.		10.95	%		10.99	%		10.83	%		11.00	%		10.91	%
Sun National Bank		10.11	%		10.05	%		9.77	%		9.66	%		9.59	%
Leverage Ratio(1):
Sun Bancorp, Inc.		9.67	%		9.80	%		9.46	%		9.58	%		9.40	%
Sun National Bank		8.98	%		8.95	%		8.54	%		8.42	%		8.28	%
Average equity to average assets		10.93	%		10.93	%		10.57	%		10.44	%		10.34	%
Allowance for loan losses to total gross loans		1.08	%		1.06	%		1.07	%		1.08	%		1.08	%
Non-performing assets to total gross loans and real estate owned		1.18	%		0.90	%		0.67	%		0.63	%		0.64	%
Allowance for loan losses to non-performing loans		95.77	%		127.11	%		169.98	%		177.14	%		175.50	%
Other data:
Net charge-offs	$	(4,781	)	$	(999	)	$	(898	)	$	(381	)	$	(1,117	)
Non-performing assets:
Non-accrual loans	$	26,853		$	18,157		$	14,505		$	14,147		$	14,322
Loans past due 90 days and accruing		1,343			2,565			837			546			298
Real estate owned, net		1,449			1,449			1,165			600			600
Total non-performing assets	$	29,645		$	22,171		$	16,507		$	15,293		$	15,220
(1) December 31, 2007 capital ratios are estimated, subject to regulatory filings.

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SUN BANCORP, INC. AND SUBSIDIARIES
HISTORICAL TRENDS IN QUARTERLY FINANCIAL DATA (unaudited)
(Dollars in thousands, except per share data)
	2007			2007			2007			2007			2006
	Q4			Q3			Q2			Q1			Q4
Profitability for the quarter:
Tax-equivalent interest income	$	49,783		$	50,406		$	50,049		$	49,441		$	48,807
Interest expense		23,554			24,567			26,108			24,758			23,991
Tax-equivalent net interest income		26,229			25,839			23,941			24,683			24,816
Tax-equivalent adjustment		391			384			391			350			271
Provision for loan losses		5,443			1,260			950			750			990
Non-interest income, excluding loss on sale of investment securities, net gain on sale of branches and net gain (loss) on sale or disposal of bank property and equipment		6,482			6,011			6,293			5,574			5,343
Loss on sale of investment securities		-			-			-			-			(1	)
Net gain on sale of branches		-			-			-			1,443			-
Net gain (loss) on sale or disposal of bank property & equipment		-			-			12			-			(330	)
Non-interest expense, excluding amortization of intangible assets		20,351			20,669			20,840			22,389			20,696
Amortization of intangible assets		1,177			1,177			1,178			1,182			1,193
Income before income taxes		5,349			8,360			6,887			7,029			6,678
Income tax expense		1,479			2,475			1,975			2,344			2,224
Net income	$	3,870		$	5,885		$	4,912		$	4,685		$	4,454
Financial ratios:
Return on average assets(1)		0.47	%		0.71	%		0.59	%		0.57	%		0.54	%
Return on average equity(1)		4.26	%		6.54	%		5.56	%		5.44	%		5.24	%
Return on average tangible equity(1),(2)		7.33	%		11.39	%		9.88	%		9.93	%		9.78	%
Net interest margin(1)		3.52	%		3.49	%		3.19	%		3.34	%		3.37	%
Efficiency ratio		66.61	%		69.43	%		73.75	%		75.19	%		74.06	%
Efficiency ratio, excluding non-operating income and non-operating expense		66.61	%		68.30	%		71.77	%		71.07	%		70.78	%
Per share date:
Earnings per common share(3):
Basic	$	0.18		$	0.27		$	0.23		$	0.22		$	0.21
Diluted	$	0.17		$	0.26		$	0.22		$	0.21		$	0.20
Book value	$	16.68		$	16.48		$	16.21		$	16.16		$	15.89
Tangible book value	$	9.71		$	9.53		$	9.21		$	8.98		$	8.62
Average basic shares	21,825,667			22,045,407			21,738,367			21,547,912			21,504,499
Average diluted shares	22,435,324			22,735,620			22,670,769			22,596,591			22,602,237
Operating non-interest income:
Service charges on deposit accounts	$	3,421		$	3,585		$	3,552		$	3,129		$	3,183
Other service charges		85			75			75			72			73
Gain on sale of loans		342			392			447			508			463
Net gain on derivative instruments		511			297			525			234			200
Other		2,123			1,662			1,694			1,631			1,424
Total operating non-interest income		6,482			6,011			6,293			5,574			5,343
Non-operating income(4):
Loss on sale of investment securities		-			-			-			-			(1	)
Net gain on sale of branches		-			-			-			1,443			-
Net gain (loss) on sale or disposal of bank property & equipment		-			-			12			-			(330	)
Total non-operating income		-			-			12			1,443			(331	)
Total non-interest income	$	6,482		$	6,011		$	6,305		$	7,017		$	5,012
Operating non-interest expense:
Salaries and employee benefits	$	11,004		$	10,816		$	10,937		$	10,626		$	10,602
Occupancy expense		2,830			2,773			2,717			3,012			2,876
Equipment expense		1,660			1,732			1,829			1,951			1,960
Amortization of intangible assets		1,177			1,177			1,178			1,182			1,193
Data processing expense		1,078			1,063			1,100			1,008			895
Advertising expense		459			415			509			473			407
Other expenses		3,320			3,685			3,538			3,002			3,221
Total operating non-interest expense		21,528			21,661			21,808			21,254			21,154
Non-operating expense(4):
Lease buy-out expenses and other branch rationalization charges		-			185			-			-			495
Severance and other related expenses		-			-			86			2,317			240
Early extinguishment of borrowings		-			-			124			-			-
Total non-operating expense		-			185			210			2,317			735
Total non-interest expense	$	21,528		$	21,846		$	22,018		$	23,571		$	21,889
(1) Amounts are annualized.
(2) Return on average tangible equity is computed by dividing annualized net income for the period by average tangible equity. Average tangible equity equals average equity less average identifiable intangible assets and goodwill.
(3) Data is adjusted for a 5% stock dividend declared in April 2007.
(4) Amount consists of items which the Company believes are not a result of normal operations.

9

SUN BANCORP, INC. AND SUBSIDIARIES
AVERAGE BALANCE SHEETS (unaudited)
(Dollars in thousands)
	For the Three Months Ended December 31, 2007							For the Three Months Ended December 31, 2006
	Average		Income/		Yield/			Average		Income/		Yield/
	Balance		Expense		Cost			Balance		Expense		Cost
Interest-earning assets:
Loans receivable(1),(2):
Commercial and industrial	$	2,030,928	$	35,943		7.08	%	$	1,937,580	$	35,379		7.30	%
Home equity		263,245		4,177		6.35			229,002		3,823		6.68
Second mortgage		80,400		1,343		6.68			77,593		1,238		6.38
Residential real estate		50,734		881		6.95			35,323		687		7.78
Other		87,155		1,647		7.56			90,358		1,864		8.25
Total loans receivable		2,512,462		43,991		7.00			2,369,856		42,991		7.26
Investment securities(3)		451,493		5,605		4.97			514,588		4,997		3.88
Interest-earning bank balances		9,911		101		4.08			26,924		325		4.83
Federal funds sold		7,014		86		4.90			37,471		494		5.27
Total interest-earning assets		2,980,880		49,783		6.68			2,948,839		48,807		6.62
Cash and due from banks		64,168							79,150
Bank properties and equipment, net		45,983							42,457
Goodwill and intangible assets, net		152,147							157,707
Other assets		79,508							59,970
Total non-interest-earning assets		341,806							339,284
Total assets	$	3,322,686						$	3,288,123
Interest-bearing liabilities:
Interest-bearing deposit accounts:
Interest-bearing demand deposits	$	788,548		4,838		2.45	%	$	810,677		6,372		3.14	%
Savings deposits		446,530		3,104		2.78			394,878		2,419		2.45
Time deposits		1,020,182		12,269		4.81			962,819		11,011		4.57
Total interest-bearing deposit accounts		2,255,260		20,211		3.58			2,168,374		19,802		3.65
Borrowed money:
Federal funds purchased		8,707		112		5.15			152		2		5.26
Securities sold under agreements to repurchase – customers		46,656		466		4.00			55,757		642		4.61
FHLB advances		85,175		881		4.14			107,460		1,255		4.67
Junior subordinated debentures		97,941		1,787		7.30			108,250		2,192		8.10
Obligation under capital lease		5,264		97		7.37			5,327		98		7.36
Total borrowings		243,743		3,343		5.49			276,946		4,189		6.05
Total interest-bearing liabilities		2,499,003		23,554		3.77			2,445,320		23,991		3.92
Non-interest-bearing demand deposits		434,066							480,339
Other liabilities		26,315							22,625
Total non-interest-bearing liabilities		460,381							502,964
Total liabilities		2,959,384							2,948,284
Shareholders’ equity		363,302							339,839
Total liabilities and shareholders’ equity	$	3,322,686						$	3,288,123
Net interest income			$	26,229						$	24,816
Interest rate spread(4)						2.91	%						2.70	%
Net interest margin(5)						3.52	%						3.37	%
Ratio of average interest-earning assets to average interest-bearing liabilities						119.28	%						120.59	%
(1)  Average balances include non-accrual loans.
(2)  Loan fees are included in interest income and the amount is not material for this analysis.
(3)  Interest earned on non-taxable investment securities is shown on a tax equivalent basis assuming a 35% marginal federal tax rate for all periods.
(4)  Interest rate spread represents the difference between the average yield on interest-earning assets and the average cost of interest-bearing liabilities.
(5)  Net interest margin represents net interest income as a percentage of average interest-earning assets.

10

SUN BANCORP, INC. AND SUBSIDIARIES
AVERAGE BALANCE SHEETS (unaudited)
(Dollars in thousands)
	For the Year Ended December 31, 2007							For the Year Ended December 31, 2006
	Average		Income/		Yield/			Average		Income/		Yield/
	Balance		Expense		Cost			Balance		Expense		Cost
Interest-earning assets:
Loans receivable(1),(2):
Commercial and industrial	$	1,986,959	$	143,231		7.21	%	$	1,880,475	$	133,312		7.09	%
Home equity		247,017		16,010		6.48			202,072		13,326		6.59
Second mortgage		78,176		5,060		6.47			74,184		4,642		6.26
Residential real estate		44,368		3,362		7.58			30,264		2,460		8.13
Other		90,234		7,104		7.87			86,505		7,136		8.25
Total loans receivable		2,446,754		174,767		7.14			2,273,500		160,876		7.08
Investment securities(3)		481,775		22,514		4.67			595,474		22,032		3.70
Interest-earning bank balances		13,871		673		4.85			14,676		702		4.78
Federal funds sold		32,966		1,725		5.23			23,938		1,172		4.90
Total interest-earning assets		2,975,366		199,679		6.71			2,907,588		184,782		6.36
Cash and due from banks		68,963							80,241
Bank properties and equipment, net		44,014							43,099
Goodwill and intangible assets, net		153,957							157,082
Other assets		72,641							57,321
Total non-interest-earning assets		339,575							337,743
Total assets	$	3,314,941						$	3,245,331
Interest-bearing liabilities:
Interest-bearing deposit accounts:
Interest-bearing demand deposits	$	759,855		22,130		2.91	%	$	841,288		23,587		2.80	%
Savings deposits		455,096		13,214		2.90			365,932		6,687		1.83
Time deposits		1,022,172		48,908		4.78			889,192		36,618		4.12
Total interest-bearing deposit accounts		2,237,123		84,252		3.77			2,096,412		66,892		3.19
Borrowed money:
Federal funds purchased		2,929		155		5.29			4,277		231		5.40
Securities sold under agreements to repurchase – customers		44,213		1,961		4.44			45,726		1,985		4.34
FHLB advances		87,306		3,764		4.31			147,017		6,833		4.65
Junior subordinated debentures		101,330		8,468		8.36			106,894		8,409		7.87
Obligation under capital lease		5,288		387		7.32			5,356		522		7.31
Total borrowings		241,066		14,735		6.11			309,270		17,980		5.81
Total interest-bearing liabilities		2,478,189		98,987		3.99			2,405,682		84,872		3.53
Non-interest-bearing demand deposits		453,281							494,488
Other liabilities		28,095							17,851
Total non-interest-bearing liabilities		481,376							512,339
Total liabilities		2,959,565							2,918,021
Shareholders’ equity		355,376							327,310
Total liabilities and shareholders’ equity	$	3,314,941						$	3,245,331
Net interest income			$	100,692						$	99,910
Interest rate spread(4)						2.72	%						2.83	%
Net interest margin(5)						3.38	%						3.44	%
Ratio of average interest-earning assets to average interest-bearing liabilities						120.06	%						120.86	%
(1)  Average balances include non-accrual loans.
(2)  Loan fees are included in interest income and the amount is not material for this analysis.
(3)  Interest earned on non-taxable investment securities is shown on a tax equivalent basis assuming a 35% marginal federal tax rate for all periods.
(4)  Interest rate spread represents the difference between the average yield on interest-earning assets and the average cost of interest-bearing liabilities.
(5)  Net interest margin represents net interest income as a percentage of average interest-earning assets.

11