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

News Release

For Immediate Release

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

Sun Bancorp, Inc. Reports Third Quarter 2008 Results

Vineland, NJ - October 27, 2008 - Sun Bancorp, Inc. (NASDAQ: SNBC) reported today third quarter net income of $4.1 million, or $0.18 per share, compared to net income of $5.9 million, or $0.25 per share, for the third quarter of 2007. The prior year comparable quarter included charges of approximately $435,000 (pre-tax), or $0.01 per share. The charges represented approximately $250,000 to write-off unamortized issuance costs relating to the call of Sun Trust IV trust preferred securities and $185,000 related to several branch consolidations during the quarter.

For the nine months ended September 30, 2008, the Company reported net income of $10.6 million, or $0.46 per share, compared to $15.5 million, or $0.65 per share, in the prior period. Net income for the prior year period included net charges of approximately $2.1 million (pre-tax), or $0.06 per share. The charges were a result of $2.4 million of severance related expenses, $791,000 to write-off unamortized issuance costs relating to the calls of Sun Trust III and Sun Trust IV trust preferred securities, $185,000 of branch consolidation costs, 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.

"In this banking environment our team is doing everything to focus our efforts across the entire organization on meeting the credit needs of our established customers, reviewing and evaluating the quality of existing loans throughout each segment of the portfolio, and executing daily the fundamentals of relationship banking," said Thomas X. Geisel, president and chief executive officer of Sun Bancorp, Inc. "Last week we completed the sale of our Delaware branches, which solidifies the commitment to our core New Jersey franchise. Additionally, the net gain realized from this transaction reinforces our already strong capital base."

"Overall credit quality remains relatively stable and did not require a linked quarter increase to the loan loss provision. The total non-performing loan balance did rise, as expected, although mainly due to a single large credit relationship. Competition for core deposits continues to be very tough and the net interest margin remains under pressure. This is especially true now, as short-term rates are being driven higher by large national competitors with local market coverage who are aggressively trying to build liquidity through special offerings."

"As we move through the final months of the year, we expect to continue to intensively manage our loan portfolio for profitable balanced growth, supported by consistent credit quality - that's our primary objective. We continue to strengthen our network across the New Jersey footprint and we like the underlying demographics. We want to support the growth efforts of our local customers as they, too, ride out the current cycle - we feel we have the capital strength and the management talent to succeed in this mission," said Geisel.

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Sun Bancorp 3Q Earnings - page two

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

-  Total assets were $3.425 billion at September 30, 2008, compared to $3.296 billion at September 30, 2007 and $3.425 billion at June 30, 2008.  

-  Total loans before allowance for loan losses were $2.666 billion at September 30, 2008, an increase of $192.0 million, or 7.8%, over September 30, 2007. Linked quarter loan growth approximated 1.1%.  

-  The allowance for loan losses to totals loans was 1.28% at September 30, 2008, compared to 1.06% at September 30, 2007 and 1.19% at June 30, 2008. The loan loss provision for the quarter of $3.7 million (0.14% of average loans outstanding) compared to $1.3 million (0.05% of average loans outstanding) for the comparable prior year period and $6.5 million (0.25% of average loans outstanding) for the linked second quarter 2008. The loan loss provision for the nine months ended September 30, 2008 of $12.4 million compared to $3.0 million for the comparable prior year period. Total non-performing assets were $49.9 million at September 30, 2008, or 1.87% of total loans and real estate owned, compared to $34.1 million, or 1.29%, at June 30, 2008 and $22.2 million, or 0.90%, at September 30, 2007. The allowance for loan losses to non-performing loans was 71.80% at September 30, 2008, compared to 127.11% at September 30, 2007 and 97.30% at June 30, 2008. Net charge-offs for the quarter of $1.1 million (0.04% of average loans outstanding), were relatively flat in comparison to the prior year period ($1.0 million, 0.04% of average loans outstanding), as compared to $2.9 million (0.11% of average loans outstanding) for the linked second quarter 2008.  

-  Net interest income (tax-equivalent basis) of $25.4 million for the quarter compares to $25.8 million for the comparable prior year period and $25.0 million for the linked second quarter 2008. Net interest margin for the quarter of 3.28% compares to 3.49% for the comparable prior year period and 3.30% for the linked second quarter 2008. Net interest margin for the nine months ended September 30, 2008 of 3.31%, compares to 3.34% for the comparable prior year period.  

-  Total operating non-interest income for the quarter of $7.0 million increased $1.0 million, or 17.2%, over the comparable prior year period and decreased $756,000, or 9.7%, over the linked second quarter 2008. The increase over the prior year period was primarily attributable to an increase in Sun Financial Services revenue earned on investment products provided by a third-party broker-dealer of $506,000, an increase in BOLI income of $294,000 and an increase in net gain on derivative instruments of $194,000. 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 an independent third-party broker-dealer. The decrease in operating non-interest income over the linked quarter was primarily due to a decrease in net gain on derivative instruments of $546,000, a decrease in gain on sale of loans of $125,000, and a decrease in investment products income of $120,000.  

-  Total operating non-interest expense for the quarter of $23.1 million increased $1.4 million, or 6.4%, over the comparable prior year period and was essentially flat over the linked second quarter 2008. While the current employee count has remained flat over the last 12 months, salaries and benefits includes an increase in salaries of $558,000, an increase in sales commissions of $205,000, and an increase in stock compensation expense of $259,000. 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 sale force. In addition, FDIC insurance increased $71,000 over the comparable prior year period as a result of an increase in assessable deposits.

The Company will hold its regularly scheduled conference call on Monday, October 27, 2008, at 11:30 a.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 bank holding company headquartered in Vineland, New Jersey. Its primary subsidiary is Sun National Bank, serving customers through 62 locations in New Jersey. 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.

SUN BANCORP, INC. AND SUBSIDIARIES
FINANCIAL HIGHLIGHTS (unaudited)
(Dollars in thousands, except per share data)
	For the Three Months Ended						For the Nine Months Ended
	September 30,						September 30,
	2008			2007			2008			2007
Profitability for the period:
Net interest income	$	24,962		$	25,455		$	74,189		$	73,338
Provision for loan losses		3,723			1,260			12,383			2,960
Non-interest income		7,046			6,011			22,223			19,333
Non-interest expense		23,050			21,846			69,928			67,435
Income before income taxes		5,235			8,360			14,101			22,276
Net income	$	4,129		$	5,885		$	10,641		$	15,482
Financial ratios:
Return on average assets (1)		0.48	%		0.71	%		0.42	%		0.62	%
Return on average equity (1)		4.56	%		6.54	%		3.88	%		5.85	%
Return on average tangible equity (1),(2)		7.74	%		11.39	%		6.58	%		10.42	%
Net interest margin (1)		3.28	%		3.49	%		3.31	%		3.34	%
Efficiency ratio		72.01	%		69.43	%		72.53	%		72.77	%
Efficiency ratio, excluding non-operating income and non-operating expense (3)		72.01	%		68.30	%		72.35	%		70.35	%
Earnings per common share (4):
Basic	$	0.18		$	0.25		$	0.47		$	0.68
Diluted	$	0.18		$	0.25		$	0.46		$	0.65
Average equity to average assets		10.57	%		10.93	%		10.83	%		10.65	%

	September 30,						December 31,
	2008			2007			2007
At period-end:
Total assets	$	3,425,379		$	3,295,576		$	3,338,392
Total deposits		2,873,378			2,682,286			2,699,091
Loans receivable, net of allowance for loan losses		2,632,019			2,447,837			2,482,917
Investments		396,117			459,325			461,639
Borrowings		78,117			131,537			154,213
Junior subordinated debentures		92,786			97,941			97,941
Shareholders' equity		357,282			361,645			362,177
Credit quality and capital ratios:
Allowance for loan losses to gross loans		1.28	%		1.06	%		1.08	%
Non-performing assets to gross loans and real estate owned		1.87	%		0.90	%		1.18	%
Allowance for loan losses to non-performing loans		71.80	%		127.11	%		95.77	%
Total capital (to risk-weighted assets) (5):
Sun Bancorp, Inc.		11.65	%		11.97	%		11.82	%
Sun National Bank		11.00	%		11.03	%		11.06	%
Tier 1 capital (to risk-weighted assets) (5):
Sun Bancorp, Inc.		10.49	%		10.99	%		10.86	%
Sun National Bank		9.84	%		10.05	%		10.09	%
Leverage ratio (5):
Sun Bancorp, Inc.		9.56	%		9.80	%		9.67	%
Sun National Bank		8.96	%		8.95	%		9.00	%
Book value (4)	$	15.94		$	15.70		$	15.89
Tangible book value (4)	$	9.34		$	9.07		$	9.25

(1) Amounts for the three and nine 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 nine months ended September 30, 2007, excludes the write-off of $250,000 and $791,000, respectively, of unamortized costs on redeemed trust preferred securities.  Non-interest income for the nine months ended September 30, 2008 excludes a gain on redemption of Visa stock of $207,000 as compared to the nine months ended September 30, 2007, which excludes a net gain of $1.4 million from the sale of branches. Non-interest expense for the three ended September 30, 2007 excludes $185,000 related to branch optimization. Non-interest expense for the nine months ended September 30, 2008 excludes a $250,000 executive sign-on incentive and $72,000 in lease buyout charges as compared to the nine months ended September 20, 2007 which excludes $124,000 resulting from the early extinguishment of an FHLB borrowing, $185,000 related to branch optimization and $2.4 million of severance related expenses.  

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

(5) September 30, 2008 capital ratios are estimated, subject to regulatory filings.

3

SUN BANCORP, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION (unaudited)
(Dollars in thousands, except par value)
	September 30,			December 31,
	2008			2007
ASSETS
Cash and due from banks	$	55,595		$	81,479
Interest-earning bank balances		2,221			2,380
Federal funds sold		24,382			2,654
Cash and cash equivalents		82,198			86,513
Investment securities available for sale  (amortized cost - $386,709 and $427,378 at September 30, 2008 and December 31, 2007, respectively)		365,794			425,805
Investment securities held to maturity  (estimated fair value - $14,884 and $18,755 at September 30, 2008 and December 31, 2007, respectively)		15,040			18,965
Loans receivable (net of allowance for loan losses - $34,120 and $27,002 at September 30, 2008 and December 31, 2007, respectively)		2,632,019			2,482,917
Restricted equity investments		15,283			16,869
Bank properties and equipment, net		48,432			48,118
Real estate owned, net		2,381			1,449
Accrued interest receivable		12,219			15,018
Goodwill		127,894			127,894
Intangible assets, net		19,947			23,479
Deferred taxes, net		13,396			3,169
Bank owned life insurance (BOLI)		74,843			72,487
Other assets		15,933			15,709
Total assets	$	3,425,379		$	3,338,392
LIABILITIES & SHAREHOLDERS� EQUITY
LIABILITIES
Deposits	$	2,873,378		$	2,699,091
Federal funds purchased		-			30,000
Securities sold under agreements to repurchase - customers		38,359			40,472
Advances from the Federal Home Loan Bank (FHLB)		19,551			63,483
Securities sold under agreements to repurchase - FHLB		15,000			15,000
Obligation under capital lease		5,207			5,258
Junior subordinated debentures		92,786			97,941
Other liabilities		23,816			24,970
Total liabilities		3,068,097			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; 23,975,894 shares issued and 22,419,171 shares outstanding at September 30, 2008; 22,722,655 shares issued and 21,712,132 shares outstanding at December 31, 2007		23,976			22,723
Additional paid-in capital		350,747			336,668
Retained earnings		18,327			20,338
Accumulated other comprehensive loss		(13,582	)		(1,027	)
Treasury stock at cost, 1,556,723 shares and 1,010,523 shares at September 30, 2008 and December 31, 2007, respectively		(22,186	)		(16,525	)
Total shareholders' equity		357,282			362,177
Total liabilities and shareholders' equity	$	3,425,379		$	3,338,392

4

SUN BANCORP, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME (unaudited)
(Dollars in thousands, except per share data)
	For the Three Months				For the Nine Months
	Ended September 30,				Ended September 30,
	2008		2007		2008			2007
INTEREST INCOME
Interest and fees on loans	$	37,819	$	44,262	$	116,104		$	130,776
Interest on taxable investment securities		3,943		4,401		11,933			13,435
Interest on non-taxable investment securities		830		699		2,434			2,090
Dividends on restricted equity investments		250		284		796			831
Interest on federal funds sold		137		376		234			1,639
Total interest income		42,979		50,022		131,501			148,771
INTEREST EXPENSE
Interest on deposits		15,905		21,130		50,175			64,041
Interest on borrowed funds		753		1,382		2,880			4,711
Interest on junior subordinated debentures		1,359		2,055		4,257			6,681
Total interest expense		18,017		24,567		57,312			75,433
Net interest income		24,962		25,455		74,189			73,338
PROVISION FOR LOAN LOSSES		3,723		1,260		12,383			2,960
Net interest income after provision for loan losses		21,239		24,195		61,806			70,378
NON-INTEREST INCOME
Service charges on deposit accounts		3,701		3,585		10,655			10,266
Other service charges		82		75		235			222
Net gain on sale of branches		-		-		-			1,443
Net gain on sale of bank property & equipment		-		-		-			12
Gain on sale of loans		286		392		1,121			1,347
Net gain on derivative instruments		491		297		2,167			1,056
Investment products income		728		222		2,353			702
BOLI income		778		484		2,356			1,437
Other		980		956		3,336			2,848
Total non-interest income		7,046		6,011		22,223			19,333
NON-INTEREST EXPENSE
Salaries and employee benefits		12,277		10,816		36,980			34,428
Occupancy expense		2,912		2,932		8,764			8,661
Equipment expense		1,522		1,732		4,812			5,512
Amortization of intangible assets		1,177		1,177		3,532			3,537
Data processing expense		1,154		1,063		3,339			3,171
Professional fees		542		406		1,590			1,783
Insurance expense		745		644		2,142			1,424
Advertising expense		336		415		1,519			1,397
Cost of real estate owned, net		13		70		(512	)		86
Other		2,372		2,591		7,762			7,436
Total non-interest expense		23,050		21,846		69,928			67,435
INCOME BEFORE INCOME TAXES		5,235		8,360		14,101			22,276
INCOME TAXES		1,106		2,475		3,460			6,794
NET INCOME	$	4,129	$	5,885	$	10,641		$	15,482
Basic earnings per share (1)	$	0.18	$	0.25	$	0.47		$	0.68
Diluted earnings per share (1)	$	0.18	$	0.25	$	0.46		$	0.65

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

5

SUN BANCORP, INC. AND SUBSIDIARIES
HISTORICAL TRENDS IN QUARTERLY FINANCIAL DATA (unaudited)
(Dollars in thousands)
	2008			2008			2008			2007			2007
	Q3			Q2			Q1			Q4			Q3
Balance sheet at quarter end:
Loans:
Commercial and industrial	$	2,164,523		$	2,146,163		$	2,061,640		$	2,024,728		$	1,990,027
Home equity		271,197			264,354			267,023			264,965			258,991
Second mortgage		85,734			83,720			81,090			81,063			79,464
Residential real estate		61,845			56,334			53,616			49,750			54,601
Other		82,840			86,783			87,593			89,413			91,094
Total gross loans		2,666,139			2,637,354			2,550,962			2,509,919			2,474,177
Allowance for loan losses		(34,120	)		(31,490	)		(27,904	)		(27,002	)		(26,340	)
Net loans		2,632,019			2,605,864			2,523,058			2,482,917			2,447,837
Goodwill		127,894			127,894			127,894			127,894			127,935
Intangible assets, net		19,947			21,124			22,301			23,479			24,656
Total assets		3,425,379			3,424,968			3,366,357			3,338,392			3,295,576
Total deposits		2,873,378			2,782,180			2,713,756			2,699,091			2,682,286
Federal funds purchased		-			29,500			56,000			30,000			-
Securities sold under agreements to repurchase - customers		38,359			36,149			36,938			40,472			46,499
Advances from the Federal Home Loan Bank (FHLB)		19,551			38,877			47,187			63,483			64,763
Securities sold under agreements to repurchase - FHLB		15,000			55,000			15,000			15,000			15,000
Obligation under capital lease		5,207			5,224			5,241			5,258			5,275
Junior subordinated debentures		92,786			92,786			92,786			97,941			97,941
Total shareholders' equity		357,282			360,268			364,242			362,177			361,645
Quarterly average balance sheet:
Loans:
Commercial and industrial	$	2,146,204		$	2,099,090		$	2,037,548		$	2,030,928		$	1,981,778
Home equity		268,178			265,481			267,836			263,245			250,474
Second mortgage		84,404			82,604			80,819			80,400			78,643
Residential real estate		57,471			52,332			50,012			50,734			49,635
Other		84,116			86,198			86,602			87,155			89,566
Total gross loans		2,640,373			2,585,705			2,522,817			2,512,462			2,450,096
Securities and other interest-earning assets		461,276			450,888			469,322			468,418			509,016
Total interest-earning assets		3,101,649			3,036,593			2,992,139			2,980,880			2,959,112
Total assets		3,422,764			3,368,523			3,326,064			3,322,686			3,292,687
Non-interest-bearing demand deposits		435,249			430,568			416,612			434,066			462,173
Total deposits		2,837,147			2,755,778			2,701,630			2,689,326			2,682,879
Total interest-bearing liabilities		2,600,310			2,539,882			2,509,725			2,499,003			2,445,187
Total shareholders' equity		361,895			367,824			366,400			363,302			359,949
Capital and credit quality measures:
Total capital (to risk-weighted assets) (1):
Sun Bancorp, Inc.		11.65	%		11.50	%		11.70	%		11.82	%		11.97	%
Sun National Bank		11.00	%		10.83	%		10.92	%		11.06	%		11.03	%
Tier 1 capital (to risk-weighted assets) (1):
Sun Bancorp, Inc.		10.49	%		10.42	%		10.71	%		10.86	%		10.99	%
Sun National Bank		9.84	%		9.75	%		9.93	%		10.09	%		10.05	%
Leverage ratio (1):
Sun Bancorp, Inc.		9.56	%		9.57	%		9.67	%		9.67	%		9.80	%
Sun National Bank		8.96	%		8.97	%		8.98	%		9.00	%		8.95	%
Average equity to average assets		10.57	%		10.92	%		11.02	%		10.93	%		10.93	%
Allowance for loan losses to total gross loans		1.28	%		1.19	%		1.09	%		1.08	%		1.06	%
Non-performing assets to total gross loans and real estate owned		1.87	%		1.29	%		1.20	%		1.18	%		0.90	%
Allowance for loan losses to non-performing loans		71.80	%		97.30	%		102.60	%		95.77	%		127.11	%
Other data:
Net charge-offs	$	(1,093	)	$	(2,941	)	$	(1,231	)	$	(4,781	)	$	(999	)
Non-performing assets:
Non-accrual loans	$	45,940		$	31,323		$	26,567		$	26,853		$	18,157
Loans past due 90 days and accruing		1,583			1,042			631			1,343			2,565
Real estate owned, net		2,381			1,714			3,476			1,449			1,449
Total non-performing assets	$	49,904		$	34,079		$	30,674		$	29,645		$	22,171
(1) September 30, 2008 capital ratios are estimated, subject to regulatory filings.

6

SUN BANCORP, INC. AND SUBSIDIARIES
HISTORICAL TRENDS IN QUARTERLY FINANCIAL DATA (unaudited)
(Dollars in thousands, except per share data)
	2008			2008			2008			2007			2007
	Q3			Q2			Q1			Q4			Q3
Profitability for the quarter:
Tax-equivalent interest income	$	43,426		$	43,337		$	46,049		$	49,443		$	50,406
Interest expense		18,017			18,319			20,976			23,554			24,567
Tax-equivalent net interest income		25,409			25,018			25,073			25,889			25,839
Tax-equivalent adjustment		447			454			410			391			384
Provision for loan losses		3,723			6,527			2,133			5,443			1,260
Non-interest income		7,046			7,802			7,375			6,822			6,011
Non-interest expense, excluding amortization of intangible assets		21,873			21,735			22,788			20,351			20,669
Amortization of intangible assets		1,177			1,178			1,177			1,177			1,177
Income before income taxes		5,235			2,926			5,940			5,349			8,360
Income tax expense		1,106			597			1,757			1,479			2,475
Net income	$	4,129		$	2,329		$	4,183		$	3,870		$	5,885
Financial ratios:
Return on average assets (1)		0.48	%		0.28	%		0.50	%		0.47	%		0.71	%
Return on average equity (1)		4.56	%		2.53	%		4.57	%		4.26	%		6.54	%
Return on average tangible equity (1),(2)		7.74	%		4.27	%		7.77	%		7.33	%		11.39	%
Net interest margin (1)		3.28	%		3.30	%		3.35	%		3.47	%		3.49	%
Efficiency ratio		72.01	%		70.79	%		74.80	%		66.61	%		69.43	%
Efficiency ratio, excluding non-operating income and non-operating expense		72.01	%		70.79	%		74.28	%		66.61	%		68.30	%
Per share data (3):
Earnings per common share:
Basic	$	0.18		$	0.10		$	0.18		$	0.17		$	0.25
Diluted	$	0.18		$	0.10		$	0.18		$	0.16		$	0.25
Book value	$	15.94		$	16.02		$	16.00		$	15.89		$	15.70
Tangible book value	$	9.34		$	9.39		$	9.40		$	9.25		$	9.07
Average basic shares (3)	22,393,168			22,696,171			22,786,251			22,916,950			23,147,677
Average diluted shares (3)	22,836,610			23,210,790			23,266,872			23,557,090			23,872,401
Operating non-interest income:
Service charges on deposit accounts	$	3,701		$	3,561		$	3,393		$	3,421		$	3,585
Other service charges		82			75			78			85			75
Gain on sale of loans		286			411			424			342			392
Net gain on derivative instruments		491			1,037			639			511			297
Investment products income		728			848			777			272			222
BOLI income		778			772			806			990			484
Other income		980			1,098			1,051			1,201			956
Total operating non-interest income		7,046			7,802			7,168			6,822			6,011
Non-operating income (4):
Gain on Visa stock redemption		-			-			207			-			-
Total non-operating income		-			-			207			-			-
Total non-interest income	$	7,046		$	7,802		$	7,375		$	6,822		$	6,011
Operating non-interest expense:
Salaries and employee benefits	$	12,277		$	12,283		$	12,170		$	11,004		$	10,816
Occupancy expense		2,912			2,810			2,970			2,830			2,773
Equipment expense		1,522			1,666			1,624			1,660			1,732
Amortization of intangible assets		1,177			1,178			1,177			1,177			1,177
Data processing expense		1,154			1,065			1,120			1,078			1,063
Professional fees		542			483			565			327			406
Insurance expense		745			728			669			695			644
Advertising expense		336			484			699			459			415
Cost of real estate owned, net		13			(534	)		9			17			70
Other expenses		2,372			2,750			2,640			2,281			2,565
Total operating non-interest expense		23,050			22,913			23,643			21,528			21,661
Non-operating expense (4):
Lease buy-out expenses and other branch rationalization charges		-			-			72			-			185
Executive sign-on incentive		-			-			250			-			-
Total non-operating expense		-			-			322			-			185
Total non-interest expense	$	23,050		$	22,913		$	23,965		$	21,528		$	21,846
(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.

7

SUN BANCORP, INC. AND SUBSIDIARIES
AVERAGE BALANCE SHEETS (unaudited)
(Dollars in thousands)
	For the Three Months Ended September 30, 2008							For the Three Months Ended September 30, 2007
	Average		Income/		Yield/			Average		Income/		Yield/
	Balance		Expense		Cost			Balance		Expense		Cost
Interest-earning assets:
Loans receivable (1),(2):
Commercial and industrial	$	2,146,204	$	30,243		5.64	%	$	1,981,778	$	36,136		7.29	%
Home equity		268,178		3,800		5.67			250,474		4,063		6.49
Second mortgage		84,404		1,384		6.56			78,643		1,289		6.56
Residential real estate		57,471		911		6.34			49,635		977		7.87
Other		84,116		1,481		7.04			89,566		1,797		8.03
Total loans receivable		2,640,373		37,819		5.73			2,450,096		44,262		7.23
Investment securities (3)		422,897		5,423		5.13			468,653		5,573		4.76
Interest-earning bank balances		9,418		47		2.00			10,881		195		7.17
Federal funds sold		28,961		137		1.89			29,482		376		5.10
Total interest-earning assets		3,101,649		43,426		5.60			2,959,112		50,406		6.81
Cash and due from banks		57,463							67,334
Bank properties and equipment, net		48,204							44,666
Goodwill and intangible assets, net		148,577							153,326
Other assets		66,871							68,249
Total non-interest-earning assets		321,115							333,575
Total assets	$	3,422,764						$	3,292,687
Interest-bearing liabilities:
Interest-bearing deposit accounts:
Interest-bearing demand deposits	$	927,312		4,180		1.80	%	$	748,076		5,484		2.93	%
Savings deposits		378,699		1,652		1.74			466,427		3,509		3.01
Time deposits		1,095,887		10,073		3.68			1,006,203		12,137		4.82
Total interest-bearing deposit accounts		2,401,898		15,905		2.65			2,220,706		21,130		3.81
Borrowed money:
Federal funds purchased		17,766		102		2.30			2,028		30		5.92
Securities sold under agreements to repurchase - customers		35,426		104		1.17			41,868		469		4.48
FHLB advances (4)		47,221		452		3.83			76,916		787		4.09
Junior subordinated debentures		92,786		1,359		5.86			98,389		2,055		8.35
Obligation under capital lease		5,213		95		7.29			5,280		96		7.27
Total borrowings		198,412		2,112		4.26			224,481		3,437		6.12
Total interest-bearing liabilities		2,600,310		18,017		2.77			2,445,187		24,567		4.02
Non-interest-bearing demand deposits		435,249							462,173
Other liabilities		25,310							25,378
Total liabilities		3,060,869							2,932,738
Shareholders' equity		361,895							359,949
Total liabilities and shareholders' equity	$	3,422,764						$	3,292,687
Net interest income			$	25,409						$	25,839
Interest rate spread (5)						2.83	%						2.79	%
Net interest margin (6)						3.28	%						3.49	%
Ratio of average interest-earning assets to average interest-bearing liabilities						119.28	%						121.02	%
(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.

8

SUN BANCORP, INC. AND SUBSIDIARIES
AVERAGE BALANCE SHEETS (unaudited)
(Dollars in thousands)
	For the Nine Months Ended September 30, 2008							For the Nine Months Ended September 30, 2007
	Average		Income/		Yield/			Average		Income/		Yield/
	Balance		Expense		Cost			Balance		Expense		Cost
Interest-earning assets:
Loans receivable (1),(2):
Commercial and industrial	$	2,094,470	$	93,089		5.93	%	$	1,972,141	$	107,288		7.25	%
Home equity		267,169		11,880		5.93			241,548		11,833		6.53
Second mortgage		82,615		4,037		6.52			77,426		3,717		6.40
Residential real estate		53,287		2,547		6.37			42,223		2,481		7.83
Other		85,633		4,551		7.09			91,272		5,457		7.97
Total loans receivable		2,583,174		116,104		5.99			2,424,610		130,776		7.19
Investment securities (3)		434,928		16,290		4.99			491,980		16,909		4.58
Interest-earning bank balances		9,811		184		2.50			15,206		572		5.02
Federal funds sold		15,760		234		1.98			41,712		1,639		5.24
Total interest-earning assets		3,043,673		132,812		5.82			2,973,508		149,896		6.72
Cash and due from banks		57,580							70,578
Bank properties and equipment, net		48,156							43,350
Goodwill and intangible assets, net		149,744							154,567
Other assets		73,481							70,328
Total non-interest-earning assets		328,961							338,823
Total assets	$	3,372,634						$	3,312,331
Interest-bearing liabilities:
Interest-bearing deposit accounts:
Interest-bearing demand deposits	$	828,107		10,547		1.70	%	$	750,186		17,292		3.07	%
Savings deposits		420,997		6,323		2.00			457,982		10,110		2.94
Time deposits		1,088,507		33,305		4.08			1,022,843		36,639		4.78
Total interest-bearing deposit accounts		2,337,611		50,175		2.86			2,231,011		64,041		3.83
Borrowed money:
Federal funds purchased		21,244		404		2.54			982		43		5.84
Securities sold under agreements to repurchase - customers		36,650		445		1.62			43,390		1,495		4.59
FHLB advances (4)		56,522		1,745		4.12			88,024		2,883		4.37
Junior subordinated debentures		92,899		4,257		6.11			102,472		6,681		8.69
Obligation under capital lease		5,230		286		7.29			5,296		290		7.30
Total borrowings		212,545		7,137		4.48			240,164		11,392		6.32
Total interest-bearing liabilities		2,550,156		57,312		3.00			2,471,175		75,433		4.07
Non-interest-bearing demand deposits		427,505							459,756
Other liabilities		29,613							28,696
Total liabilities		3,007,274							2,959,627
Shareholders' equity		365,360							352,704
Total liabilities and shareholders' equity	$	3,372,634						$	3,312,331
Net interest income			$	75,500						$	74,463
Interest rate spread (5)						2.82	%						2.65	%
Net interest margin (6)						3.31	%						3.34	%
Ratio of average interest-earning assets to average interest-bearing liabilities						119.35	%						120.33	%
(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