Sun Bancorp (SNBC) 8-K Sun Bancorp, Inc. Reports Second Quarter 2008 Results

Exhibit 99

News Release

For Immediate Release

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

Sun Bancorp, Inc. Reports Second Quarter 2008 Results

VINELAND, NJ - July 21, 2008 – Sun Bancorp, Inc. (NASDAQ: SNBC) reported today second quarter net income of $2.3 million, or $0.10 per share, compared to net income of $4.9 million, or $0.21 per share, for the second quarter of 2007. The prior year comparable quarter includes net charges of approximately $751,000 (pre-tax), or $0.02 per share. The charges represent approximately $541,000 of write-off of unamortized issuance costs of redeemed Sun Trust III trust preferred securities, an early extinguishment of debt charge of $124,000 for an FHLB borrowing prepayment and $86,000 of severance related expenses.

For the six months ended June 30, 2008, the Company reported net income of $6.5 million, or $0.28 per share, compared to $9.6 million, or $0.40 per share, in the prior period. Net income for the prior year period includes net charges of approximately $1.6 million (pre-tax), or $0.05 per share. The charges were a result of $2.4 million of severance related expenses, the $541,000 write-off of unamortized issuance costs of redeemed Sun Trust III trust preferred securities, and an early extinguishment of debt charge of $124,000 for an FHLB borrowing prepayment, offset by a net gain of $1.4 million realized in the first quarter 2007 from the sale of branches.

"As previously announced, we recorded a $6.5 million provision for loan losses during the second quarter, increasing our reserve coverage to 1.19%,” said Thomas X. Geisel, president and chief executive officer of Sun Bancorp, Inc. “Clearly, our top priority during the quarter and this year is credit quality -- closely monitoring the financial status of borrowers throughout our markets, gathering information, working on the early detection of potential problems, taking pre-emptive steps where necessary and doing the analysis required to maintain adequate reserves. We are operating in an environment where credit skills and expertise are paramount. Among the independent New Jersey banking institutions, we feel we are well equipped to manage our way through this cycle.”

“We know that capital strength and preservation is also a priority. We have been judiciously repurchasing shares at attractive pricing and will continue to selectively do so, but not to the detriment of our healthy equity position and capital adequacy. Our total common equity available to shareholders currently stands at $360.3 million, with average equity to average assets at 10.92%, tangible capital at 6.45% and our total risk-based capital ratio for Sun National Bank at a level of 10.86%. These measures are well in excess of regulatory minimums for an institution to be considered well-capitalized."

“On the operating side, during the second quarter we did grow loans 3.4% over the linked first quarter, bringing year-to-date loan growth to a respectable 7.7% over where we stood at June 30, 2007. Deposits grew 2.5%, or $68.4 million, over the linked first quarter, which is an encouraging result of our efforts to do a better job selling in the branches and in bringing in new lower-cost core deposit relationships. Non-interest income is growing as we continue to emphasize this area, and our overall expense control efforts remain firm,” said Geisel.

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The following is an overview of the key financial highlights for the quarter:

-   Total assets were $3.425 billion at June 30, 2008, compared to $3.325 billion at June 30, 2007 and $3.366 billion at March 31, 2008.  

-   Total loans before allowance for loan losses were $2.637 billion at June 30, 2008, an increase of $188.6 million, or 7.7% over total loans at June 30, 2007. Linked quarter loan growth approximated 3.4%.  

-   Total non-performing assets were $34.1 million at June 30, 2008, or 1.29% of total loans and real estate owned, compared to $30.7 million, or 1.20% at March 31, 2008 and $16.5 million, or 0.67% at June 30, 2007.  Net charge-offs for the quarter were $2.9 million and the loan loss provision was $6.5 million, or 0.11% and 0.25% of average loans outstanding, respectively. Net charge-offs and the loan loss provision as a percentage of average loans outstanding were both 0.04% for June 30, 2007 and 0.05% and 0.08% for the linked quarter, respectively. The allowance for loan losses to total loans is 1.19% at June 30, 2008, compared to 1.07% at June 30, 2007 and 1.09% at March 31, 2008. The allowance for loans losses to non-performing loans was 97.30% at June 30, 2008, compared to 169.98% at June 30, 2007 and 102.60% at March 31, 2008.  As previously disclosed in our release of July 2, 2008, the current quarter loan loss provision of $6.5 million and the increase in allowance for loan losses is a result of internal downgrades to existing watch list credits, primarily attributable to two commercial loans (a commercial relationship and a commercial real estate development, the former of which is currently performing). The Company expects at this time that net charge-offs will approximate 0.30% of average loans for 2008.  

-   Total deposits were $2.782 billion at June 30, 2008, an increase of $56.4 million, or 2.1%, over deposits at June 30, 2007, and an increase of $68.4 million, or 2.5%, over the linked first quarter.  

   -   Net interest income (tax-equivalent basis) of $25.0 million for the quarter compares to $23.9 million for the comparable prior year period and $25.1 million for the linked first quarter 2008. Net interest margin for the quarter of 3.30% compares to 3.19% for the comparable prior year period and 3.35% for the linked first quarter 2008. Net interest margin for the six months ended June 30, 2008 of 3.32%, compares to 3.26% for the comparable prior year period.  

-  Total operating non-interest income for the quarter of $7.8 million increased $1.5 million, or 24.0%, over the comparable prior year period and increased $634,000, or 8.8%, over the linked first quarter 2008. The increase over the prior year period was primarily attributable to an increase in net gain on derivative instruments of $512,000, an increase in BOLI income of $288,000 and an increase in Sun Financial Services revenue earned on investment products provided by a third-party broker-dealer of $561,000. The increase in investment products revenue during the current quarter over the comparable prior year period was primarily attributable, as previously reported, 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 increase in operating non-interest income over the linked quarter was primarily attributable to an increase in net gain on derivative instruments of $398,000 and an increase in service charges on deposit accounts of $168,000.  

-  Total operating non-interest expenses for the quarter of $22.9 million increased $1.1 million, or 5.1%, over the comparable prior year period and decreased $730,000, or 3.1%, over the linked first quarter 2008. While the current employee count has remained essentially flat over the last 12 months, salaries and benefits includes an increase in salaries of $358,000, an increase in sales commissions of $494,000, and an increase in stock compensation expense of $133,000.  The increase in sales commissions over the comparable prior year period is primarily attributable to the previously discussed internalization of the Company’s investment products sales force. In addition, FDIC insurance increased $219,000 over the comparable prior year period.  The decrease in operating non-interest expense over the linked quarter was primarily attributable to an overall net gain recognized on the sale of three other real estate properties during the quarter of $539,000 and a decrease in advertising expense of $215,000.  

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2

The Company will hold its regularly scheduled conference call on Tuesday, July 22, 2008, at 1:30 p.m. (ET). Participants may listen to the live Web cast through the Sun Bancorp Web site at http://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 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 http://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.

3

SUN BANCORP, INC. AND SUBSIDIARIES
FINANCIAL HIGHLIGHTS (unaudited)
(Dollars in thousands, except per share data)
	For the Three Months Ended						For the Six Months Ended
	June 30,						June 30,
	2008			2007			2008			2007
Profitability for the period:
Net interest income	$	24,564		$	23,550		$	49,227		$	47,883
Provision for loan losses		6,527			950			8,660			1,700
Non-interest income		7,802			6,305			15,177			13,322
Non-interest expense		22,913			22,018			46,878			45,589
Income before income taxes		2,926			6,887			8,866			13,916
Net income	$	2,329		$	4,912		$	6,512		$	9,597
Financial ratios:
Return on average assets (1)		0.28	%		0.59	%		0.39	%		0.58	%
Return on average equity (1)		2.53	%		5.56	%		3.55	%		5.50	%
Return on average tangible equity (1),(2)		4.27	%		9.88	%		6.01	%		9.90	%
Net interest margin (1)		3.30	%		3.19	%		3.32	%		3.26	%
Efficiency ratio		70.79	%		73.75	%		72.79	%		74.49	%
Efficiency ratio, excluding non-operating income and non-operating expense (3)		70.79	%		71.77	%		72.52	%		71.42	%
Earnings per common share (4):
Basic	$	0.10		$	0.22		$	0.29		$	0.42
Diluted	$	0.10		$	0.21		$	0.28		$	0.40
Average equity to average assets		10.92	%		10.57	%		10.97	%		10.51	%

	June 30,						December 31,
	2008			2007			2007
At period-end:
Total assets	$	3,424,968		$	3,324,633		$	3,338,392
Total deposits		2,782,180			2,725,747			2,699,091
Loans receivable, net of allowance for loan losses		2,605,864			2,422,627			2,482,917
Investments		419,087			501,694			461,639
Borrowings		164,750			115,932			154,213
Junior subordinated debentures		92,786			97,941			97,941
Shareholders’ equity		360,268			355,758			362,177
Credit quality and capital ratios:
Allowance for loan losses to gross loans		1.19	%		1.07	%		1.08	%
Non-performing assets to gross loans and real estate owned		1.29	%		0.67	%		1.18	%
Allowance for loan losses to non-performing loans		97.30	%		169.98	%		95.77	%
Total capital (to risk-weighted assets) (5):
Sun Bancorp, Inc.		11.54	%		11.80	%		11.82	%
Sun National Bank		10.86	%		10.74	%		11.06	%
Tier 1 capital (to risk-weighted assets) (5):
Sun Bancorp, Inc.		10.46	%		10.83	%		10.86	%
Sun National Bank		9.78	%		9.77	%		10.09	%
Leverage ratio (5):
Sun Bancorp, Inc.		9.57	%		9.46	%		9.67	%
Sun National Bank		8.95	%		8.54	%		9.00	%
Book value (4)	$	16.02		$	15.44		$	15.89
Tangible book value (4)	$	9.39		$	8.77		$	9.25

(1) Amounts for the three and six 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 expense, 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 three and six months ended June 30, 2007 excludes a write-off of $541,000 of unamortized costs on redeemed trust preferred securities.  Non-interest income for the six months ended June 30, 2008 excludes a gain on redemption of Visa stock of $207,000 as compared to the six months ended June 30, 2007, which excludes a net gain of $1.4 million from the sale of branches. Non-interest expense for the six months ended June 30, 2008 excludes a $250,000 executive sign-on incentive and $72,000 in lease buyout charges.  Non-interest expense for the three and six months ended June 30, 2007 excludes $86,000 and $2.4 million, respectively, of severance related expenses and $124,000 as a result of early extinguishment of FHLB borrowing.

(4) Data is adjusted for a 5% stock dividend declared in April 2008.

(5) June 30, 2008 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)
	June 30,			December 31,
	2008			2007
ASSETS
Cash and due from banks	$	87,038		$	81,479
Interest-earning bank balances		1,557			2,380
Federal funds sold		247			2,654
Cash and cash equivalents		88,842			86,513
Investment securities available for sale  (amortized cost - $395,515 and $427,378 at June 30, 2008 and December 31, 2007, respectively)		384,944			425,805
Investment securities held to maturity  (estimated fair value - $16,036 and $18,755 at June 30, 2008 and December 31, 2007, respectively)		16,209			18,965
Loans receivable (net of allowance for loan losses - $31,490 and $27,002 at June 30, 2008 and December 31, 2007, respectively)		2,605,864			2,482,917
Restricted equity investments		17,934			16,869
Bank properties and equipment, net		48,385			48,118
Real estate owned, net		1,714			1,449
Accrued interest receivable		12,379			15,018
Goodwill		127,894			127,894
Intangible assets, net		21,124			23,479
Deferred taxes, net		8,282			3,169
Bank owned life insurance (BOLI)		74,066			72,487
Other assets		17,331			15,709
Total assets	$	3,424,968		$	3,338,392
LIABILITIES & SHAREHOLDERS’ EQUITY
LIABILITIES
Deposits	$	2,782,180		$	2,699,091
Federal funds purchased		29,500			30,000
Securities sold under agreements to repurchase - customers		36,149			40,472
Advances from the Federal Home Loan Bank (FHLB)		38,877			63,483
Securities sold under agreements to repurchase - FHLB		55,000			15,000
Obligation under capital lease		5,224			5,258
Junior subordinated debentures		92,786			97,941
Other liabilities		24,984			24,970
Total liabilities		3,064,700			2,976,215
SHAREHOLDERS' EQUITY
Preferred stock, $1 par value, 1,000,000 shares authorized, none issued		-			-
Common stock, $1 par value, 50,000,000 shares authorized; 23,871,334 shares issued and 22,495,011 shares outstanding at June 30, 2008; 22,722,655 shares issued and 21,712,132 shares outstanding at December 31, 2007		23,871			22,723
Additional paid-in capital		349,558			336,668
Retained earnings		14,198			20,338
Accumulated other comprehensive loss		(6,854	)		(1,027	)
Treasury stock at cost, 1,376,323 shares and 1,010,523 shares at June 30, 2008 and December 31, 2007, respectively		(20,505	)		(16,525	)
Total shareholders' equity		360,268			362,177
Total liabilities and shareholders' equity	$	3,424,968		$	3,338,392

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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 Six Months
	Ended June 30,				Ended June 30,
	2008		2007		2008		2007
INTEREST INCOME
Interest and fees on loans	$	37,890	$	43,403	$	78,285	$	86,514
Interest on taxable investment securities		3,807		4,500		7,990		9,034
Interest on non-taxable investment securities		843		733		1,604		1,391
Dividends on restricted equity investments		277		281		546		547
Interest on federal funds sold		66		741		97		1,263
Total interest income		42,883		49,658		88,522		98,749
INTEREST EXPENSE
Interest on deposits		15,957		22,077		34,270		42,911
Interest on borrowed funds		1,008		1,558		2,127		3,329
Interest on junior subordinated debentures		1,354		2,473		2,898		4,626
Total interest expense		18,319		26,108		39,295		50,866
Net interest income		24,564		23,550		49,227		47,883
PROVISION FOR LOAN LOSSES		6,527		950		8,660		1,700
Net interest income after provision for loan losses		18,037		22,600		40,567		46,183
NON-INTEREST INCOME
Service charges on deposit accounts		3,561		3,552		6,954		6,681
Other service charges		75		75		153		147
Net gain on sale of branches		-		-		-		1,443
Net gain on sale of bank property & equipment		-		12		-		12
Net gain on sale of loans		411		447		835		955
Net gain on derivative instruments		1,037		525		1,676		759
Investment products income		848		287		1,625		480
BOLI income		772		484		1,578		953
Other		1,098		923		2,356		1,892
Total non-interest income		7,802		6,305		15,177		13,322
NON-INTEREST EXPENSE
Salaries and employee benefits		12,283		11,023		24,703		23,612
Occupancy expense		2,810		2,717		5,852		5,729
Equipment expense		1,666		1,829		3,290		3,780
Amortization of intangible assets		1,178		1,178		2,355		2,360
Data processing expense		1,065		1,100		2,185		2,108
Professional fees		483		566		1,048		1,377
Insurance expense		728		522		1,397		780
Advertising expense		484		509		1,183		982
Other		2,216		2,574		4,865		4,861
Total non-interest expense		22,913		22,018		46,878		45,589
INCOME BEFORE INCOME TAXES		2,926		6,887		8,866		13,916
INCOME TAXES		597		1,975		2,354		4,319
NET INCOME	$	2,329	$	4,912	$	6,512	$	9,597
Basic earnings per share (1)	$	0.10	$	0.22	$	0.29	$	0.42
Diluted earnings per share (1)	$	0.10	$	0.21	$	0.28	$	0.40

(1) Data is adjusted for a 5% stock dividend declared in April 2008.  

6

SUN BANCORP, INC. AND SUBSIDIARIES
HISTORICAL TRENDS IN QUARTERLY FINANCIAL DATA (unaudited)
(Dollars in thousands)
	2008			2008			2007			2007			2007
	Q2			Q1			Q4			Q3			Q2
Balance sheet at quarter end:
Loans:
Commercial and industrial	$	2,146,163		$	2,061,640		$	2,024,728		$	1,990,027		$	1,985,584
Home equity		264,354			267,023			264,965			258,991			245,283
Second mortgage		83,720			81,090			81,063			79,464			79,120
Residential real estate		56,334			53,616			49,750			54,601			47,101
Other		86,783			87,593			89,413			91,094			91,618
Total gross loans		2,637,354			2,550,962			2,509,919			2,474,177			2,448,706
Allowance for loan losses		(31,490	)		(27,904	)		(27,002	)		(26,340	)		(26,079	)
Net loans		2,605,864			2,523,058			2,482,917			2,447,837			2,422,627
Goodwill		127,894			127,894			127,894			127,935			127,936
Intangible assets, net		21,124			22,301			23,479			24,656			25,833
Total assets		3,424,968			3,366,357			3,338,392			3,295,576			3,324,633
Total deposits		2,782,180			2,713,756			2,699,091			2,682,286			2,725,747
Federal funds purchased		29,500			56,000			30,000			-			-
Securities sold under agreements to repurchase - customers		36,149			36,938			40,472			46,499			44,612
Advances from the Federal Home Loan Bank (FHLB)		38,877			47,187			63,483			64,763			66,029
Securities sold under agreements to repurchase - FHLB		55,000			15,000			15,000			15,000			-
Obligation under capital lease		5,224			5,241			5,258			5,275			5,291
Junior subordinated debentures		92,786			92,786			97,941			97,941			97,941
Total shareholders' equity		360,268			364,242			362,177			361,645			355,758
Quarterly average balance sheet:
Loans:
Commercial and industrial	$	2,099,090		$	2,037,548		$	2,030,928		$	1,981,778		$	1,978,175
Home equity		265,481			267,836			263,245			250,474			240,150
Second mortgage		82,604			80,819			80,400			78,643			77,442
Residential real estate		52,332			50,012			50,734			49,635			39,193
Other		86,198			86,602			87,155			89,566			91,578
Total gross loans		2,585,705			2,522,817			2,512,462			2,450,096			2,426,538
Securities and other interest-earning assets		450,888			469,322			468,418			509,016			577,669
Total interest-earning assets		3,036,593			2,992,139			2,980,880			2,959,112			3,004,207
Total assets		3,368,523			3,326,064			3,322,686			3,292,687			3,341,506
Non-interest-bearing demand deposits		430,568			416,612			434,066			462,173			458,851
Total deposits		2,755,778			2,701,630			2,689,326			2,682,879			2,724,554
Total interest-bearing liabilities		2,539,882			2,509,725			2,499,003			2,445,187			2,501,896
Total shareholders' equity		367,824			366,400			363,302			359,949			353,280
Capital and credit quality measures:
Total capital (to risk-weighted assets) (1):
Sun Bancorp, Inc.		11.54	%		11.70	%		11.82	%		11.97	%		11.80	%
Sun National Bank		10.86	%		10.93	%		11.06	%		11.03	%		10.74	%
Tier 1 capital (to risk-weighted assets) (1):
Sun Bancorp, Inc.		10.46	%		10.71	%		10.86	%		10.99	%		10.83	%
Sun National Bank		9.78	%		9.94	%		10.09	%		10.05	%		9.77	%
Leverage ratio (1):
Sun Bancorp, Inc.		9.57	%		9.67	%		9.67	%		9.80	%		9.46	%
Sun National Bank		8.95	%		8.98	%		9.00	%		8.95	%		8.54	%
Average equity to average assets		10.92	%		11.02	%		10.93	%		10.93	%		10.57	%
Allowance for loan losses to total gross loans		1.19	%		1.09	%		1.08	%		1.06	%		1.07	%
Non-performing assets to total gross loans and real estate owned		1.29	%		1.20	%		1.18	%		0.90	%		0.67	%
Allowance for loan losses to non-performing loans		97.30	%		102.60	%		95.77	%		127.11	%		169.98	%
Other data:
Net charge-offs	$	(2,941	)	$	(1,231	)	$	(4,781	)	$	(999	)	$	(898	)
Non-performing assets:
Non-accrual loans	$	31,323		$	26,567		$	26,853		$	18,157		$	14,505
Loans past due 90 days and accruing		1,042			631			1,343			2,565			837
Real estate owned, net		1,714			3,476			1,449			1,449			1,165
Total non-performing assets	$	34,079		$	30,674		$	29,645		$	22,171		$	16,507
(1) June 30, 2008 capital ratios are estimated, subject to regulatory filings.

7

SUN BANCORP, INC. AND SUBSIDIARIES
HISTORICAL TRENDS IN QUARTERLY FINANCIAL DATA (unaudited)
(Dollars in thousands, except per share data)
	2008			2008			2007			2007			2007
	Q2			Q1			Q4			Q3			Q2
Profitability for the quarter:
Tax-equivalent interest income	$	43,337		$	46,049		$	49,443		$	50,406		$	50,049
Interest expense		18,319			20,976			23,554			24,567			26,108
Tax-equivalent net interest income		25,018			25,073			25,889			25,839			23,941
Tax-equivalent adjustment		454			410			391			384			391
Provision for loan losses		6,527			2,133			5,443			1,260			950
Non-interest income		7,802			7,375			6,822			6,011			6,305
Non-interest expense, excluding amortization of intangible assets		21,735			22,788			20,351			20,669			20,840
Amortization of intangible assets		1,178			1,177			1,177			1,177			1,178
Income before income taxes		2,926			5,940			5,349			8,360			6,887
Income tax expense		597			1,757			1,479			2,475			1,975
Net income	$	2,329		$	4,183		$	3,870		$	5,885		$	4,912
Financial ratios:
Return on average assets (1)		0.28	%		0.50	%		0.47	%		0.71	%		0.59	%
Return on average equity (1)		2.53	%		4.57	%		4.26	%		6.54	%		5.56	%
Return on average tangible equity (1),(2)		4.27	%		7.77	%		7.33	%		11.39	%		9.88	%
Net interest margin (1)		3.30	%		3.35	%		3.47	%		3.49	%		3.19	%
Efficiency ratio		70.79	%		74.80	%		66.61	%		69.43	%		73.75	%
Efficiency ratio, excluding non-operating income and non-operating expense		70.79	%		74.28	%		66.61	%		68.30	%		71.77	%
Per share data (3):
Earnings per common share:
Basic	$	0.10		$	0.18		$	0.17		$	0.25		$	0.22
Diluted	$	0.10		$	0.18		$	0.16		$	0.25		$	0.21
Book value	$	16.02		$	16.00		$	15.89		$	15.70		$	15.44
Tangible book value	$	9.39		$	9.40		$	9.25		$	9.07		$	8.77
Average basic shares(3)	22,696,171			22,786,251			22,916,950			23,147,677			22,825,286
Average diluted shares (3)	23,220,775			23,266,872			23,557,090			23,872,401			23,804,307
Operating non-interest income:
Service charges on deposit accounts	$	3,561		$	3,393		$	3,421		$	3,585		$	3,552
Other service charges		75			78			85			75			75
Gain on sale of loans		411			424			342			392			447
Net gain on derivative instruments		1,037			639			511			297			525
Investment products income		848			777			272			222			287
BOLI income		772			806			990			484			484
Other		1,098			1,051			1,201			956			935
Total operating non-interest income		7,802			7,168			6,822			6,011			6,305
Non-operating income (4):
Gain on Visa stock redemption		-			207			-			-			-
Total non-operating income		-			207			-			-			-
Total non-interest income	$	7,802		$	7,375		$	6,822		$	6,011		$	6,305
Operating non-interest expense:
Salaries and employee benefits	$	12,283		$	12,170		$	11,004		$	10,816		$	10,937
Occupancy expense		2,810			2,970			2,830			2,773			2,717
Equipment expense		1,666			1,624			1,660			1,732			1,829
Amortization of intangible assets		1,178			1,177			1,177			1,177			1,178
Data processing expense		1,065			1,120			1,078			1,063			1,100
Professional fees		483			565			327			406			566
Insurance expense		728			669			695			644			522
Advertising expense		484			699			459			415			509
Other expenses		2,216			2,649			2,298			2,635			2,450
Total operating non-interest expense		22,913			23,643			21,528			21,661			21,808
Non-operating expense (4):
Lease buy-out expenses and other branch rationalization charges		-			72			-			185			-
Severance and other related expenses		-			-			-			-			86
Executive sign-on incentive		-			250			-			-			-
Early extinguishment of borrowings		-			-			-			-			124
Total non-operating expense		-			322			-			185			210
Total non-interest expense	$	22,913		$	23,965		$	21,528		$	21,846		$	22,018
(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 2008.
(4) Amount consists of items which the Company believes are not a result of normal operations.

8

SUN BANCORP, INC. AND SUBSIDIARIES
AVERAGE BALANCE SHEETS (unaudited)
(Dollars in thousands)
	For the Three Months Ended June 30, 2008							For the Three Months Ended June 30, 2007
	Average		Income/		Yield/			Average		Income/		Yield/
	Balance		Expense		Cost			Balance		Expense		Cost
Interest-earning assets:
Loans receivable (1),(2):
Commercial and industrial	$	2,099,090	$	30,340		5.78	%	$	1,978,175	$	35,648		7.21	%
Home equity		265,481		3,925		5.91			240,150		3,945		6.57
Second mortgage		82,604		1,335		6.46			77,442		1,238		6.39
Residential real estate		52,332		818		6.25			39,193		747		7.62
Other		86,198		1,472		6.83			91,578		1,825		7.97
Total loans receivable		2,585,705		37,890		5.86			2,426,538		43,403		7.15
Investment securities (3)		426,652		5,331		5.00			505,315		5,764		4.56
Interest-earning bank balances		9,929		50		2.01			16,457		141		3.43
Federal funds sold		14,307		66		1.85			55,897		741		5.30
Total interest-earning assets		3,036,593		43,337		5.71			3,004,207		50,049		6.66
Cash and due from banks		58,723							71,814
Bank properties and equipment, net		48,371							42,958
Goodwill and intangible assets, net		149,746							154,494
Other assets		75,090							68,033
Total non-interest-earning assets		331,930							337,299
Total assets	$	3,368,523						$	3,341,506
Interest-bearing liabilities:
Interest-bearing deposit accounts:
Interest-bearing demand deposits	$	801,486		3,047		1.52	%	$	741,568		5,873		3.17	%
Savings deposits		422,807		1,866		1.77			467,455		3,508		3.00
Time deposits		1,100,917		11,044		4.01			1,056,680		12,696		4.81
Total interest-bearing deposit accounts		2,325,210		15,957		2.75			2,265,703		22,077		3.90
Borrowed money:
Federal funds purchased		28,256		172		2.43			863		13		6.03
Securities sold under agreements to repurchase - customers		35,839		108		1.21			43,011		498		4.63
FHLB advances (4)		52,561		633		4.82			86,136		950		4.41
Junior subordinated debentures		92,786		1,354		5.84			100,887		2,473		9.81
Obligation under capital lease		5,230		95		7.27			5,296		97		7.33
Total borrowings		214,672		2,362		4.40			236,193		4,031		6.83
Total interest-bearing liabilities		2,539,882		18,319		2.89			2,501,896		26,108		4.17
Non-interest-bearing demand deposits		430,568							458,851
Other liabilities		30,249							27,479
Total non-interest-bearing liabilities		460,817							486,330
Total liabilities		3,000,699							2,988,226
Shareholders' equity		367,824							353,280
Total liabilities and shareholders' equity	$	3,368,523						$	3,341,506
Net interest income			$	25,018						$	23,941
Interest rate spread (5)						2.82	%						2.49	%
Net interest margin (6)						3.30	%						3.19	%
Ratio of average interest-earning assets to average interest-bearing liabilities						119.56	%						120.08	%
(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)  Amounts include advances from FHLB and securities sold under agreements to repurchase - FHLB.
(5)  Interest rate spread represents the difference between the average yield on interest-earning assets and the average cost of interest-bearing liabilities.
(6)  Net interest margin represents net interest income as a percentage of average interest-earning assets.

9

SUN BANCORP, INC. AND SUBSIDIARIES
AVERAGE BALANCE SHEETS (unaudited)
(Dollars in thousands)
	For the Six Months Ended June 30, 2008							For the Six Months Ended June 30, 2007
	Average		Income/		Yield/			Average		Income/		Yield/
	Balance		Expense		Cost			Balance		Expense		Cost
Interest-earning assets:
Loans receivable (1),(2):
Commercial and industrial	$	2,068,319	$	62,846		6.08	%	$	1,967,243	$	71,152		7.23	%
Home equity		266,659		8,080		6.06			237,011		7,770		6.56
Second mortgage		81,711		2,653		6.49			76,808		2,428		6.32
Residential real estate		51,172		1,636		6.39			38,456		1,504		7.82
Other		86,400		3,070		7.11			92,138		3,660		7.94
Total loans receivable		2,554,261		78,285		6.13			2,411,656		86,514		7.17
Investment securities (3)		441,009		10,867		4.93			503,836		11,336		4.50
Interest-earning bank balances		10,009		137		2.74			17,405		377		4.33
Federal funds sold		9,087		97		2.13			47,928		1,263		5.27
Total interest-earning assets		3,014,366		89,386		5.93			2,980,825		99,490		6.68
Cash and due from banks		57,639							72,228
Bank properties and equipment, net		48,132							42,681
Goodwill and intangible assets, net		150,335							155,198
Other assets		76,821							71,384
Total non-interest-earning assets		332,927							341,491
Total assets	$	3,347,293						$	3,322,316
Interest-bearing liabilities:
Interest-bearing deposit accounts:
Interest-bearing demand deposits	$	777,959		6,367		1.64	%	$	751,258		11,808		3.14	%
Savings deposits		442,378		4,671		2.11			453,690		6,601		2.91
Time deposits		1,084,777		23,232		4.28			1,031,301		24,502		4.75
Total interest-bearing deposit accounts		2,305,114		34,270		2.97			2,236,249		42,911		3.84
Borrowed money:
Federal funds purchased		23,001		302		2.63			450		13		5.78
Securities sold under agreements to repurchase - customers		37,269		341		1.83			44,163		1,026		4.65
FHLB advances (4)		61,224		1,293		4.22			93,670		2,096		4.48
Junior subordinated debentures		92,956		2,898		6.24			104,548		4,626		8.85
Obligation under capital lease		5,239		191		7.29			5,304		194		7.32
Total borrowings		219,689		5,025		4.57			248,135		7,955		6.41
Total interest-bearing liabilities		2,524,803		39,295		3.11			2,484,384		50,866		4.09
Non-interest-bearing demand deposits		423,590							458,528
Other liabilities		31,788							30,382
Total non-interest-bearing liabilities		455,378							488,910
Total liabilities		2,980,181							2,973,294
Shareholders' equity		367,112							349,022
Total liabilities and shareholders' equity	$	3,347,293						$	3,322,316
Net interest income			$	50,091						$	48,624
Interest rate spread (5)						2.82	%						2.59	%
Net interest margin (6)						3.32	%						3.26	%
Ratio of average interest-earning assets to average interest-bearing liabilities						119.39	%						119.98	%
(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)  Amounts include advances from FHLB and securities sold under agreements to repurchase - FHLB.
(5)  Interest rate spread represents the difference between the average yield on interest-earning assets and the average cost of interest-bearing liabilities.
(6)  Net interest margin represents net interest income as a percentage of average interest-earning assets.

10