News Release
For Immediate Release
Contact: Dan Chila, EVP, Chief Financial Officer (856) 691-7700
Sun Bancorp, Inc. Reports First Quarter 2008 Results
VINELAND, NJ – April 14, 2008 – Sun Bancorp, Inc. (NASDAQ: SNBC) reported net income of $4.2 million, or $0.19 per share diluted, for the quarter ended March 31, 2008, compared to net income of $4.7 million, or $0.21 per share diluted, for the first quarter of 2007 and $3.9 million, or $0.17 per share diluted, for the linked fourth quarter of 2007. Net income for the first quarter 2007 included a net charge of approximately $874,000 (pre-tax), or $0.02 per share. The net charge was a result of severance and other related expenses of approximately $2.3 million (pre-tax), or $0.07 per share, offset by a net gain realized from the sale of three branches during the quarter of $1.4 million (pre-tax), or $0.05 per share.
“Net income for the first quarter was higher than the fourth quarter of 2007, albeit due to a lower loan loss provision. We hope to build a trend of sequentially improved results as we move through this year,” said Thomas X. Geisel, president and chief executive officer. “In the current banking environment, our main priority is to maintain a vigilant watch over credit quality in our existing loan portfolios, while continuing to fill the loan pipelines with carefully selected new credits that will provide a trouble-free and profitable revenue stream. Everyone at Sun Bancorp clearly understands that executing well on these fundamental objectives will drive our performance in 2008.”
“On the deposit side, we have had some recent success as a result of our merger disruption campaign targeted at our competitors, but the competition for gathering rationally priced core deposits is as tough as ever and our net interest margin will reflect this,” said Geisel. “Capital adequacy and capital deployment are key industry issues now. The Company’s capital strength is quite good, as evidenced by a tangible capital ratio of 6.66%. While we intend to continue to buy back our stock as prudent opportunities arise, we expect to do so in less volume (61,400 shares were repurchased during the first quarter 2008) in order to maintain our focus on capital preservation and growth.”
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Sun Bancorp 1Q Earnings – page two
The following is an overview of the key financial highlights for the quarter:
| · | Total assets were $3.366 billion at March 31, 2008, compared to $3.338 billion at December 31, 2007 and $3.327 billion at March 31, 2007. |
| · | Total loans before allowance for loan losses were $2.551 billion at March 31, 2008, an increase of $135.1 million, or 5.6%, over March 31, 2007, and an increase of $41.0 million, or 1.6%, over December 31, 2007. |
| · | Total non-performing assets were $30.7 million at March 31, 2008, or 1.20% of total loans and real estate owned, compared to $29.6 million, or 1.18%, at December 31, 2007 and $15.3 million, or 0.63%, at March 31, 2007. Net charge-offs for the quarter were $1.2 million and the loan loss provision was $2.1 million, or 0.05% and 0.08% of average loans outstanding, respectively. Net charge-offs and the loan loss provision as a percentage of average loans outstanding were 0.02% and 0.03% for March 31, 2007 and 0.19% and 0.22% for December 31, 2007, respectively. The allowance for loan losses to total loans is 1.09% at March 31, 2008, compared to 1.08% at March 31, 2007 and December 31, 2007. The allowance for loan losses to non-performing loans was 102.60% at March 31, 2008, compared to 177.14% at March 31, 2007 and 95.77% at December 31, 2007. |
| · | Total deposits were $2.714 billion at March 31, 2008, an increase of $19.5 million, or 0.7%, over deposits at March 31, 2007. Total deposits increased approximately 0.5% over the linked quarter. The Company continues to rely on deposits as its primary funding source. However, in continued efforts to balance deposit growth and net interest margin, especially under the current interest rate environment and highly competitive local deposit pricing, the Company anticipates that other funding sources may be more cost efficient. |
| · | Net interest income (tax-equivalent basis) of $25.1 million for the quarter compares to $24.7 million for the comparable prior year period and $25.9 million for the linked fourth quarter 2007. Net interest margin for the quarter of 3.35% compares to 3.34% for the comparable prior year period and 3.47% for the linked fourth quarter 2007. The margin compression for the current quarter primarily reflects the Federal Reserve’s interest rate reductions which totaled 200 basis points during the quarter. These reductions caused interest-earning assets to re-price downward faster than interest-bearing liabilities. The Company expects that any further Fed rate reductions may cause further margin compression. Assuming no further rate reductions, the Company expects net interest margin to increase over the balance of the year with the rollover of the short-term certificates of deposit portfolio. |
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Sun Bancorp 1Q Earnings – page three
| · | Total operating non-interest income for the quarter of $7.2 million increased $1.6 million, or 28.9%, over the comparable prior year period and increased $364,000, or 5.3%, over the linked fourth quarter 2007. The increase over the prior year was primarily attributable to increases in service charges on deposit accounts of $264,000, an increase in net gain on derivative instruments of $405,000, an increase in BOLI income of $337,000 and an increase of $584,000 in Sun Financial Services revenue earned on investment products provided by a third-party broker-dealer. The increase in operating non-interest income over the linked quarter was primarily attributable to an increase of $505,000 in Sun Financial Services revenue earned on investment products provided by a third-party broker-dealer and a net gain on derivative instruments of $128,000. The increase in investment products revenue during the current quarter in comparison to the comparable prior year period and linked quarter was primarily attributable to the internalization of the Company’s investment products sales force, which previously operated under an agreement with the independent third-party broker-dealer. In addition, BOLI income over the linked quarter decreased $185,000 as the Company realized a BOLI restructuring benefit of $301,000 in the previous quarter. The Company also realized a gain of $207,000 during the current quarter from the mandatory redemption of its Class B Visa shares in conjunction with Visa’s initial public offering on March 19, 2008. |
| · | Total operating non-interest expense for the quarter of $23.6 million increased $2.4 million, or 11.2%, over the comparable prior year period and increased $2.1 million, or 9.8%, over the linked fourth quarter 2007. While the current employee count has remained essentially flat over the last 12 months, salaries and benefits increased $1.5 million over the comparable prior year period. The increase in salaries and benefits includes an increase in salaries of $658,000, an increase in sales commissions of $601,000, an increase in stock compensation expense of $178,000 and an increase in employer payroll taxes of $109,000. The increase in sales commission during the current quarter was primarily attributable to the internalization of the Company’s investment products sales force which previously operated under an agreement with the independent third-party broker-dealer. The other increases over the comparable prior year period include an increase in FDIC insurance of $396,000, an increase in professional fees of $78,000, an increase in advertising expense of $226,000 and an increase in problem loan costs of $123,000. The current quarter increase in total operating non-interest expense over the linked quarter is impacted by an expense reduction of $545,000 in the Company’s reserve for unfunded loan commitments recognized in the fourth quarter 2007. The increases over the linked quarter represent an increase in salaries and benefits |
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Sun Bancorp 1Q Earnings – page four
of $1.2 million, which includes an increase in salaries of $441,000, an increase in sales commissions of $307,000, an increase in stock compensation expense of $87,000 and an increase in first quarter employer payroll taxes of $457,000. The other noteworthy increases are primarily increased professional fees of $238,000, increased advertising expense of $240,000 and an increase in problem loan costs of $109,000.
The Company will hold its regularly scheduled conference call on Tuesday, April 15, 2008, at 1:30 p.m. (ET). Participants may listen to the live Web cast through the Sun Bancorp Web site at www.sunnb.com. Participants are advised to log on 10 minutes ahead of the scheduled start of the call. An Internet-based replay also 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 nearly 70 branch locations in 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.
