Sun Bancorp 8K Financial Statements and Exhibits | SNBC 27 Jan 09

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 2008

VINELAND, NJ, January 27, 2009 – Sun Bancorp, Inc. (NASDAQ:SNBC) reported today net income of $4.3 million, or $0.19 per share, for the quarter ended December 31, 2008, compared to net income of $3.9 million, or $0.16 per share, for the fourth quarter of 2007. The following were key items which affected net income for the current quarter:

·	Pre-tax net gain on the sale of branches of $11.5 million, or $0.29 per share.

·	Pre-tax other-than-temporary impairment (OTTI) charges of $7.5 million, or $0.22 per share, on pooled trust preferred securities in the investment portfolio.

·	Increased level of loan loss provision for the quarter to $7.6 million, which compares to $3.7 million for the third quarter 2008 and $5.4 million for the fourth quarter 2007.

Net income for the year ended December 31, 2008 was $14.9 million, or $0.65 per share, compared to net income of $19.4 million, or $0.82 per share, for the prior year. Net income for the current year included a pre-tax net gain from the sale of branches in the fourth quarter of $11.5 million, or $0.29 per share, offset by OTTI charges of $7.5 million, or $0.22 per share, on pooled trust preferred securities in the investment portfolio. Net income for the prior year included pre-tax net charges of approximately $2.1 million, 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 Capital Trust III and Sun Capital 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.

“The country is working through a very tough economic environment,” said Thomas X. Geisel, president and chief executive officer of Sun Bancorp. "At the onset of the national economic downturn, New Jersey held up fairly well. However, as the downturn is persisting, New Jersey is mirroring the overall economy. The last six months is evidence of this trend.”

“We are going to continue to be proactive during 2009 in reviewing and evaluating the quality of existing loans throughout each segment of the portfolio. Our goal for 2009 remains to intensively manage our loan portfolio for profitable balanced growth supported by consistent credit quality.”

As previously announced, on January 9, 2009, the Company completed the sale of 89,310 shares of Preferred Stock, Series A under the U.S. Treasury’s TARP Capital Purchase Plan for $89.3 million. “We are pleased to have qualified and been selected to participate in this program. The additional capital strength provided through this program will further support our lending activities and the expansion of services into our communities, as well as provide flexibility to evaluate future opportunities that may arise,” said Geisel.

The Company’s capital ratios continue to remain strong and are “well capitalized” by all regulatory standards. Had the Treasury’s investment under the TARP Capital Purchase Plan been completed prior to December 31, 2008, the Company’s leverage capital ratio at year-end would have increased from approximately 9.58% to approximately 12.25% and the total risk-based capital ratio would have increased from approximately 11.71% to approximately 14.43%. The Company’s tangible equity ratio would have improved to 8.45% from 6.10% at December 31, 2008.

The following is an overview of the key financial highlights:

·	Total assets were $3.622 billion at December 31, 2008, compared to $3.425 billion at September 30, 2008 and $3.338 billion at December 31, 2007.

·	Total loans before allowance for loan losses were $2.740 billion at December 31, 2008, an increase of $229.9 million, or 9.2%, over total loans at December 31, 2007. Linked quarter loan growth approximated 2.8%.

The loan loss provision for the quarter of $7.6 million, or 0.28% of average loans outstanding, compared to $5.4 million, or 0.22% of average loans outstanding, for the comparable prior year period and $3.7 million, or 0.14% of average loans outstanding, for the linked third quarter 2008. The loan loss provision for the year ended December 31, 2008 of $20.0 million compared to $8.4 million for the comparable prior year. The allowance for loan losses to total loans was 1.36% at December 31, 2008, compared to 1.08% at December 31, 2007 and 1.28% at September 30, 2008. Total non-performing assets were $48.8 million at December 31, 2008, or 1.78% of total loans and real estate owned, compared to $29.6 million, or 1.18%, at December 31, 2007, and $49.9 million, or 1.87%, at September 30, 2008. The allowance for loan losses to non-performing loans was 79.69% at December 31, 2008, compared to 95.77% at December 31, 2007 and 71.80% at September 30, 2008. Net charge-offs for the quarter of $4.4 million, or 0.16% of average loans outstanding, compared to $4.8 million, or 0.19% of average loans outstanding, for the comparable prior year quarter and $1.1 million, or 0.04% of average loans outstanding, for the linked third quarter 2008. Net charge-offs for the year ended December 31, 2008 of $9.7 million, or 0.37% of average loans outstanding, compared to $7.1 million, or 0.29% of average loans outstanding, for the comparable prior year.

Total deposits were $2.896 billion at December 31, 2008, an increase of $197.3 million, or 7.3%, over deposits at December 31, 2007. In October 2008, the Company sold its six branch offices located in Delaware, including deposits approximating $95 million. Normalized deposit growth, excluding sold deposits and brokered certificates of deposit, approximated 5.7%.

Net interest income (tax-equivalent basis) of $25.9 million for the quarter compares to $25.9 million for the comparable prior year period and $25.4 million for the linked third quarter. The net interest margin for the quarter of 3.26% compares to 3.47% for the comparable prior year period and 3.28% for the linked third quarter 2008. Net interest margin for the year ended December 31, 2008 of 3.30% compares to the prior year of 3.37%.

At December 31, 2008, the Company had two pooled trust-preferred securities classified as available for sale, with an original cost basis of $9.0 million and an estimated fair value of $1.5 million. The Company fully evaluated these securities and determined that the unrealized losses of $7.5 million are other-than-temporary and recognized a charge of $7.5 million for the quarter. In addition, the Company has two single trust-preferred securities with an original cost basis of $20 million and an estimated fair value of $10.3 million and a pooled trust-preferred security with an original cost basis of $8.8 million and an estimated fair value of $2.7 million, both classified as available for sale. The Company has reviewed these securities and determined that the decreases in estimated fair value are temporary. The Company performs ongoing analysis of the trust-preferred securities and, as a result, the above estimates are subject to change in future periods.

Total operating non-interest income for the fourth quarter of 2008 of $6.1 million decreased $703,000, or 10.3%, over the comparable prior year period. The decrease over prior year was attributable to a reduction in service charges on deposit accounts of $158,000, and a decrease in gain on sale of loans and gain on derivative instruments of $138,000 and $100,000, respectively, both due to a reduction in transaction volume. In addition, bank owned life insurance (BOLI) income decreased $329,000 primarily as a result of the recognition of $301,000 in 2007 related to the conversion of former general account BOLI policies to a separate account policy. These decreases were offset by an increase in Sun Financial Services revenue earned on investment products provided by a third-party broker of $416,000. In 2008, the Company internalized the Sun Financial Services investment products sales force, which previously operated under an agreement with an independent third-party broker-dealer. Total operating non-interest income decreased $927,000, or 13.2%, over the linked quarter primarily due to a reduction in service charges on deposit accounts of $438,000, a decrease in BOLI income of $117,000, and a decrease in gain on sale of loans and gain on derivative instruments of $82,000 and $80,000, respectively. Total operating non-interest income for the year 2008 of $28.1 million increased $3.4 million, or 13.9%, over 2007. The increase over prior year was primarily attributable to an increase in Sun Financial Services revenue earned on investment products provided by a third-party broker-dealer of $2.1 million, an increase in gain on derivative instruments of $1.0 million and an increase in BOLI income of $590,000.

Total operating non-interest expense for the quarter of $22.8 million increased $1.3 million, or 6.1%, over the comparable prior year period. The increase over prior year was due to an increase in advertising expense of $390,000, an increase in professional fees of $418,000, an increase of $223,000 in problem loan costs, and an increase in FDIC insurance of $152,000 due to higher assessable deposits and an increase in assessment rate. Total operating non-interest expense decreased $207,000 over the linked third quarter 2008 primarily due to a reduction in salaries and benefits of $1.6 million as a result of $1.9 million adjustment to annual incentives. This decrease was offset by an increase in advertising expense of $513,000, an increase in professional fees of $203,000, an increase in problem loan costs of $201,000 and an increase in insurance expense of $156,000. Total operating non-interest expense for the year of $92.4 million increased $6.2 million, or 7.2%, over the prior year primarily due to an increase in salaries and benefits of $3.9 million resulting from increases in sales commissions of $1.5 million, salary expense of $1.5 million and stock compensation expense of $662,000. The increase in sales commissions was attributable to the internalization of the Sun Financial Services sales force as previously discussed above. In addition, professional fees increased $549,000 mostly due to an increase in legal fees and FDIC insurance increased $838,000 primarily due to a one-time assessment credit of $526,000 recognized in 2007 and an increase in assessment rate and assessable deposits during 2008.

The Company will hold its regularly scheduled conference call on Wednesday, January 28, 2009, 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 will be available at the Web site for two weeks following the call.

Sun Bancorp, Inc. is a $3.6 billion asset 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 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 Year Ended
	December 31,						December 31,
	2008			2007			2008			2007
Profitability for the period:
Net interest income	$	25,472		$	25,498		$	99,661		$	98,836
Provision for loan losses		7,617			5,443			20,000			8,403
Non-interest income		10,207			6,822			32,430			26,155
Non-interest expense		22,843			21,528			92,771			88,963
Income before income taxes		5,219			5,349			19,320			27,625
Net income	$	4,253		$	3,870		$	14,894		$	19,352

Financial ratios:
Return on average assets (1)		0.49	%		0.47	%		0.44	%		0.58	%
Return on average equity (1)		4.71	%		4.26	%		4.09	%		5.45	%
Return on average tangible equity (1),(2)		7.94	%		7.33	%		6.92	%		9.61	%
Net interest margin (1)		3.26	%		3.47	%		3.30	%		3.37	%
Efficiency ratio		64.02	%		66.61	%		69.66	%		72.77	%
Efficiency ratio, excluding non-operating income and non-operating expense (3)		72.31	%		66.61	%		72.45	%		70.35	%

Earnings per common share (4):
Basic	$	0.19		$	0.17		$	0.66		$	0.85
Diluted	$	0.19		$	0.16		$	0.65		$	0.82

Average equity to average assets		10.38	%		10.93	%		10.72	%		10.72	%

	December 31,
	2008			2007
At period-end:
Total assets	$	3,622,126		$	3,338,392
Total deposits		2,896,364			2,699,091
Loans receivable, net of allowance for loan losses		2,702,516			2,482,917
Investments		453,584			461,639
Borrowings		154,097			154,213
Junior subordinated debentures		92,786			97,941
Shareholders’ equity		358,508			362,177

Credit quality and capital ratios:
Allowance for loan losses to gross loans		1.36	%		1.08	%
Non-performing assets to gross loans and real estate owned		1.78	%		1.18	%
Allowance for loan losses to non-performing loans		79.69	%		127.11	%

Total capital (to risk-weighted assets) (5):
Sun Bancorp, Inc.		11.71	%		11.82	%
Sun National Bank		11.17	%		11.06	%
Tier 1 capital (to risk-weighted assets) (5):
Sun Bancorp, Inc.		10.48	%		10.86	%
Sun National Bank		9.94	%		10.09	%
Leverage ratio (5):
Sun Bancorp, Inc.		9.58	%		9.67	%
Sun National Bank		9.08	%		9.00	%

Book value (4)	$	16.35		$	15.89
Tangible book value (4)	$	9.66		$	9.25

(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 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 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 three months ended December 31, 2008 excludes a net gain of $11.6 million on the sale of branches and bank property, and an impairment charge of $7.5 million on available for sale securities. Non-interest income for the year ended December 31, 2008 excludes a net gain of $11.6 million on the sale of branches and bank property, an impairment charge of $7.5 million on available for sale securities and a gain on redemption of Visa stock of $207,000 as compared to the year ended December 31, 2007, which excludes a net gain of $1.4 million from the sale of branches and a gain on sale of bank equipment of $12,000. Non-interest expense for the year ended December 31, 2008 excludes $72,000 in lease buyout charges and $250,000 in executive sign-on incentive as compared to the year ended December 31, 2007, which excludes $185,000 related to branch optimization, $2.4 million of severance related expenses and $124,000 resulting from the early extinguishment of an FHLB borrowing.

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

(5) December 31, 2008 capital ratios are estimated, subject to regulatory filings.

SUN BANCORP, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION (unaudited)
(Dollars in thousands, except par value)
	December 31,			December 31,
	2008			2007
ASSETS
Cash and due from banks	$	31,237		$	81,479
Interest-earning bank balances		26,784			2,380
Federal funds sold		412			2,654
Cash and cash equivalents		58,433			86,513
Investment securities available for sale (amortized cost - $444,628 and $427,378 at December 31, 2008 and December 31, 2007, respectively)		423,513			425,805
Investment securities held to maturity (estimated fair value - $13,601 and $18,755 at December 31, 2008 and December 31, 2007, respectively)		13,765			18,965
Loans receivable (net of allowance for loan losses - $37,309 and $27,002 at December 31, 2008 and December 31, 2007, respectively)		2,702,516			2,482,917
Restricted equity investments		16,306			16,869
Bank properties and equipment, net		48,642			48,118
Real estate owned, net		1,962			1,449
Accrued interest receivable		12,254			15,018
Goodwill		127,894			127,894
Intangible assets, net		18,769			23,479
Deferred taxes, net		16,707			3,169
Bank owned life insurance (BOLI)		75,504			72,487
Other assets		105,861			15,709
Total assets	$	3,622,126		$	3,338,392

LIABILITIES & SHAREHOLDERS’ EQUITY
LIABILITIES
Deposits	$	2,896,364		$	2,699,091
Federal funds purchased		71,500			30,000
Securities sold under agreements to repurchase - customers		20,327			40,472
Advances from the Federal Home Loan Bank (FHLB)		42,081			63,483
Securities sold under agreements to repurchase - FHLB		15,000			15,000
Obligation under capital lease		5,189			5,258
Junior subordinated debentures		92,786			97,941
Other liabilities		120,371			24,970
Total liabilities		3,263,618			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; 24,037,431 shares issued and 21,930,708 shares outstanding at December 31, 2008; 22,722,655 shares issued and 21,712,132 shares outstanding at December 31, 2007		24,037			22,723
Additional paid-in capital		351,430			336,668
Retained earnings		22,580			20,338
Accumulated other comprehensive loss		(13,377	)		(1,027	)
Treasury stock at cost, 2,106,723 shares and 1,010,523 shares at December 31, 2008 and December 31, 2007, respectively		(26,162	)		(16,525	)
Total shareholders' equity		358,508			362,177
Total liabilities and shareholders' equity	$	3,622,126		$	3,338,392

SUN BANCORP, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME (unaudited)
(Dollars in thousands, except per share data)
	For the Three Months					For the Year
	Ended December 31,					Ended December 31,
	2008			2007		2008			2007
INTEREST INCOME
Interest and fees on loans	$	38,050		$	43,651	$	154,154		$	174,427
Interest on taxable investment securities		4,043			4,306		15,976			17,741
Interest on non-taxable investment securities		822			728		3,256			2,818
Dividends on restricted equity investments		187			281		983			1,112
Interest on federal funds sold		31			86		265			1,725
Total interest income		43,133			49,052		174,634			197,823
INTEREST EXPENSE
Interest on deposits		15,677			20,211		65,852			84,252
Interest on borrowed funds		527			1,556		3,407			6,267
Interest on junior subordinated debentures		1,457			1,787		5,714			8,468
Total interest expense		17,661			23,554		74,973			98,987
Net interest income		25,472			25,498		99,661			98,836
PROVISION FOR LOAN LOSSES		7,617			5,443		20,000			8,403
Net interest income after provision for loan losses		17,855			20,055		79,661			90,433
NON-INTEREST INCOME
Service charges on deposit accounts		3,263			3,421		13,918			13,687
Other service charges		82			85		317			307
Net gain on sale of branches		11,454			-		11,454			1,443
Net gain on sale of bank property & equipment		131			-		131			12
Gain on sale of loans		204			342		1,325			1,689
Impairment charge on available for sale securities		(7,497	)		-		(7,497	)		-
Gain on derivative instruments		411			511		2,578			1,567
Investment products income		688			272		3,041			974
BOLI income		661			990		3,017			2,427
Other		810			1,201		4,146			4,049
Total non-interest income		10,207			6,822		32,430			26,155
NON-INTEREST EXPENSE
Salaries and employee benefits		10,643			11,004		47,623			45,432
Occupancy expense		2,919			2,830		11,683			11,491
Equipment expense		1,609			1,660		6,421			7,172
Amortization of intangible assets		1,178			1,177		4,710			4,714
Data processing expense		1,120			1,078		4,459			4,249
Professional fees		745			327		2,335			2,110
Insurance expense		901			695		3,043			2,119
Advertising expense		849			459		2,368			1,856
Cost of real estate owned, net		15			17		(497	)		103
Other		2,864			2,281		10,626			9,717
Total non-interest expense		22,843			21,528		92,771			88,963
INCOME BEFORE INCOME TAXES		5,219			5,349		19,320			27,625
INCOME TAXES		966			1,479		4,426			8,273
NET INCOME	$	4,253		$	3,870	$	14,894		$	19,352

Basic earnings per share (1)	$	0.19		$	0.17	$	0.66		$	0.85
Diluted earnings per share (1)	$	0.19		$	0.16	$	0.65		$	0.82

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

SUN BANCORP, INC. AND SUBSIDIARIES
HISTORICAL TRENDS IN QUARTERLY FINANCIAL DATA (unaudited)
(Dollars in thousands)
	2008			2008			2008			2008			2007
	Q4			Q3			Q2			Q1			Q4
Balance sheet at quarter end:
Loans:
Commercial and industrial	$	2,234,202		$	2,164,523		$	2,146,163		$	2,061,640		$	2,024,728
Home equity		274,360			271,197			264,354			267,023			264,965
Second mortgage		84,388			85,734			83,720			81,090			81,063
Residential real estate		67,473			61,845			56,334			53,616			49,750
Other		79,402			82,840			86,783			87,593			89,413
Total gross loans		2,739,825			2,666,139			2,637,354			2,550,962			2,509,919
Allowance for loan losses		(37,309	)		(34,120	)		(31,490	)		(27,904	)		(27,002	)
Net loans		2,702,516			2,632,019			2,605,864			2,523,058			2,482,917
Goodwill		127,894			127,894			127,894			127,894			127,894
Intangible assets, net		18,769			19,947			21,124			22,301			23,479
Total assets		3,622,126			3,425,379			3,424,968			3,366,357			3,338,392
Total deposits		2,896,364			2,873,378			2,782,180			2,713,756			2,699,091
Federal funds purchased		71,500			-			29,500			56,000			30,000
Securities sold under agreements to repurchase - customers		20,327			38,359			36,149			36,938			40,472
Advances from the Federal Home Loan Bank (FHLB)		42,081			19,551			38,877			47,187			63,483
Securities sold under agreements to repurchase - FHLB		15,000			15,000			55,000			15,000			15,000
Obligation under capital lease		5,189			5,207			5,224			5,241			5,258
Junior subordinated debentures		92,786			92,786			92,786			92,786			97,941
Total shareholders' equity		358,508			357,282			360,268			364,242			362,177
Quarterly average balance sheet:
Loans:
Commercial and industrial	$	2,195,218		$	2,146,204		$	2,099,090		$	2,037,548		$	2,030,928
Home equity		275,791			268,178			265,481			267,836			263,245
Second mortgage		85,530			84,404			82,604			80,819			80,400
Residential real estate		62,481			57,471			52,332			50,012			50,734
Other		81,426			84,116			86,198			86,602			87,155
Total gross loans		2,700,446			2,640,373			2,585,705			2,522,817			2,512,462
Securities and other interest-earning assets		476,305			461,276			450,888			469,322			468,418
Total interest-earning assets		3,176,751			3,101,649			3,036,593			2,992,139			2,980,880
Total assets		3,483,145			3,422,764			3,368,523			3,326,064			3,322,686
Non-interest-bearing demand deposits		407,151			435,249			430,568			416,612			434,066
Total deposits		2,916,153			2,837,147			2,755,778			2,701,630			2,689,326
Total interest-bearing liabilities		2,679,673			2,600,310			2,539,882			2,509,725			2,499,003
Total shareholders' equity		361,513			361,895			367,824			366,400			363,302

Capital and credit quality measures:
Total capital (to risk-weighted assets) (1):
Sun Bancorp, Inc.		11.71	%		11.67	%		11.50	%		11.70	%		11.82	%
Sun National Bank		11.17	%		11.02	%		10.83	%		10.92	%		11.06	%
Tier 1 capital (to risk-weighted assets) (1):
Sun Bancorp, Inc.		10.48	%		10.51	%		10.42	%		10.71	%		10.86	%
Sun National Bank		9.94	%		9.86	%		9.75	%		9.93	%		10.09	%
Leverage ratio (1):
Sun Bancorp, Inc.		9.58	%		9.56	%		9.57	%		9.67	%		9.67	%
Sun National Bank		9.08	%		8.97	%		8.97	%		8.98	%		9.00	%

Average equity to average assets		10.38	%		10.57	%		10.92	%		11.02	%		10.93	%
Allowance for loan losses to total gross loans		1.36	%		1.28	%		1.19	%		1.09	%		1.08	%
Non-performing assets to total gross loans and real estate owned		1.78	%		1.87	%		1.29	%		1.20	%		1.18	%
Allowance for loan losses to non-performing loans		79.69	%		71.80	%		97.30	%		102.60	%		95.77	%

Other data:
Net charge-offs		(4,428	)		(1,093	)		(2,941	)		(1,231	)		(4,781	)
Non-performing assets:
Non-accrual loans	$	42,233		$	45,940		$	31,323		$	26,567		$	26,853
Loans past due 90 days and accruing		4,587			1,583			1,042			631			1,343
Real estate owned, net		1,962			2,381			1,714			3,476			1,449
Total non-performing assets	$	48,782		$	49,904		$	34,079		$	30,674		$	29,645
(1) December 31, 2008 capital ratios are estimated, subject to regulatory filings.


SUN BANCORP, INC. AND SUBSIDIARIES
HISTORICAL TRENDS IN QUARTERLY FINANCIAL DATA (unaudited)
(Dollars in thousands, except per share data)
	2008			2008			2008			2008			2007
	Q4			Q3			Q2			Q1			Q4
Profitability for the quarter:
Tax-equivalent interest income	$	43,574		$	43,426		$	43,337		$	46,049		$	49,443
Interest expense		17,661			18,017			18,319			20,976			23,554
Tax-equivalent net interest income		25,913			25,409			25,018			25,073			25,889
Tax-equivalent adjustment		441			447			454			410			391
Provision for loan losses		7,617			3,723			6,527			2,133			5,443
Non-interest income excluding net gain on sale of branches, net gain on sale of bank property and impairment charge on available for sale securities		6,119			7,046			7,802			7,375			6,822
Net gain on sale of branches		11,454			-			-			-			-
Net gain on sale of bank property		131			-			-			-			-
Impairment charge on available for sale securities		(7,497	)		-			-			-			-
Non-interest expense excluding amortization of intangible assets		21,665			21,873			21,735			22,788			20,351
Amortization of intangible assets		1,178			1,177			1,178			1,177			1,177
Income before income taxes		5,219			5,235			2,926			5,940			5,349
Income tax expense		966			1,106			597			1,757			1,479
Net income	$	4,253		$	4,129		$	2,329		$	4,183		$	3,870
Financial ratios:
Return on average assets (1)		0.49	%		0.48	%		0.28	%		0.50	%		0.47	%
Return on average equity (1)		4.71	%		4.56	%		2.53	%		4.57	%		4.26	%
Return on average tangible equity (1),(2)		7.94	%		7.74	%		4.27	%		7.77	%		7.33	%
Net interest margin (1)		3.26	%		3.28	%		3.30	%		3.35	%		3.47	%
Efficiency ratio		64.02	%		72.01	%		70.79	%		74.80	%		66.61	%
Efficiency ratio, excluding non-operating income and non-operating expense		72.31	%		72.01	%		70.79	%		74.28	%		66.61	%
Per share data (3):
Earnings per common share:
Basic	$	0.19		$	0.18		$	0.10		$	0.18		$	0.17
Diluted	$	0.19		$	0.18		$	0.10		$	0.18		$	0.16
Book value	$	16.35		$	15.94		$	16.02		$	16.00		$	15.89
Tangible book value	$	9.66		$	9.34		$	9.39		$	9.40		$	9.25
Average basic shares (3)	22,213,041			22,393,168			22,696,171			22,786,251			22,916,950
Average diluted shares (3)	22,463,586			22,937,658			23,210,790			23,266,872			23,557,090
Operating non-interest income:
Service charges on deposit accounts	$	3,263		$	3,701		$	3,561		$	3,393		$	3,421
Other service charges		82			82			75			78			85
Gain on sale of loans		204			286			411			424			342
Gain on derivative instruments		411			491			1,037			639			511
Investment products income		688			728			848			777			272
BOLI income		661			778			772			806			990
Other income		810			980			1,098			1,051			1,201
Total operating non-interest income		6,119			7,046			7,802			7,168			6,822
Non-operating income (4):
Net gain on sale of branches		11,454			-			-			-			-
Net gain on sale of bank property		131			-			-			-			-
Impairment charge on available for sale securities		(7,497	)		-			-			-			-
Gain on Visa stock redemption		-			-			-			207			-
Total non-operating income		4,088			-			-			207			-
Total non-interest income	$	10,207		$	7,046		$	7,802		$	7,375		$	6,822
Operating non-interest expense:
Salaries and employee benefits	$	10,643		$	12,277		$	12,283		$	12,170		$	11,004
Occupancy expense		2,919			2,912			2,810			2,970			2,830
Equipment expense		1,609			1,522			1,666			1,624			1,660
Amortization of intangible assets		1,178			1,177			1,178			1,177			1,177
Data processing expense		1,120			1,154			1,065			1,120			1,078
Professional fees		745			542			483			565			327
Insurance expense		901			745			728			669			695
Advertising expense		849			336			484			699			459
Cost of real estate owned, net		15			13			(534	)		9			17
Other expenses		2,864			2,372			2,750			2,640			2,281
Total operating non-interest expense		22,843			23,050			22,913			23,643			21,528
Non-operating expense (4):
Lease buy-out expenses and other branch rationalization charges		-			-			-			72			-
Executive sign-on incentive		-			-			-			250			-
Total non-operating expense		-			-			-			322			-
Total non-interest expense	$	22,843		$	23,050		$	22,913		$	23,965		$	21,528
(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.

SUN BANCORP, INC. AND SUBSIDIARIES
AVERAGE BALANCE SHEETS (unaudited)
(Dollars in thousands)
	For the Three Months Ended December 31, 2008							For the Three Months Ended December 31, 2007
	Average		Income/		Yield/			Average		Income/		Yield/
	Balance		Expense		Cost			Balance		Expense		Cost
Interest-earning assets:
Loans receivable (1),(2):
Commercial and industrial	$	2,195,218	$	30,604		5.58	%	$	2,030,928	$	35,603		7.01	%
Home equity		275,791		3,694		5.36			263,245		4,177		6.35
Second mortgage		85,530		1,396		6.53			80,400		1,343		6.68
Residential real estate		62,481		962		6.16			50,734		881		6.95
Other		81,426		1,394		6.85			87,155		1,647		7.56
Total loans receivable		2,700,446		38,050		5.64			2,512,462		43,651		6.95
Investment securities (3)		428,159		5,417		5.06			451,493		5,605		4.97
Interest-earning bank balances		34,299		76		0.89			9,911		101		4.08
Federal funds sold		13,847		31		0.90			7,014		86		4.90
Total interest-earning assets		3,176,751		43,574		5.49			2,980,880		49,443		6.63
Cash and due from banks		51,709							64,168
Bank properties and equipment, net		48,247							45,983
Goodwill and intangible assets, net		147,380							152,147
Other assets		59,058							79,508
Total non-interest-earning assets		306,394							341,806
Total assets	$	3,483,145						$	3,322,686

Interest-bearing liabilities:
Interest-bearing deposit accounts:
Interest-bearing demand deposits	$	1,012,525		3,808		1.50	%	$	788,548		4,838		2.45	%
Savings deposits		318,720		1,309		1.64			446,530		3,104		2.78
Time deposits		1,177,757		10,560		3.59			1,020,182		12,269		4.81
Total interest-bearing deposit accounts		2,509,002		15,677		2.50			2,255,260		20,211		3.58
Borrowed money:
Federal funds purchased		9,810		17		0.69			8,707		112		5.15
Securities sold under agreements to repurchase - customers		29,989		33		0.44			46,656		466		4.00
FHLB advances (4)		32,890		382		4.65			85,175		881		4.14
Obligation under capital lease		5,196		95		7.31			5,264		97		7.37
Junior subordinated debentures		92,786		1,457		6.28			97,941		1,787		7.30
Total borrowings		170,671		1,984		4.65			243,743		3,343		5.49
Total interest-bearing liabilities		2,679,673		17,661		2.64			2,499,003		23,554		3.77
Non-interest-bearing demand deposits		407,151							434,066
Other liabilities		34,808							26,315
Total liabilities		3,121,632							2,959,384
Shareholders' equity		361,513							363,302
Total liabilities and shareholders' equity	$	3,483,145						$	3,322,686

Net interest income			$	25,913						$	25,889
Interest rate spread (5)						2.85	%						2.86	%
Net interest margin (6)						3.26	%						3.47	%
Ratio of average interest-earning assets to average interest-bearing liabilities						118.55	%						119.28	%

(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.

SUN BANCORP, INC. AND SUBSIDIARIES
AVERAGE BALANCE SHEETS (unaudited)
(Dollars in thousands)
	For the Year Ended December 31, 2008							For the Year Ended December 31, 2007
	Average		Income/		Yield/			Average		Income/		Yield/
	Balance		Expense		Cost			Balance		Expense		Cost
Interest-earning assets:
Loans receivable (1),(2):
Commercial and industrial	$	2,119,795	$	123,693		5.84	%	$	1,986,959	$	142,891			7.19	%
Home equity		269,336		15,574		5.78			247,017		16,010			6.48
Second mortgage		83,348		5,433		6.52			78,176		5,060			6.47
Residential real estate		55,598		3,509		6.31			44,368		3,362			7.58
Other		84,575		5,945		7.03			90,234		7,104			7.87
Total loans receivable		2,612,652		154,154		5.90			2,446,754		174,427			7.13
Investment securities (3)		433,226		21,707		5.01			481,775		22,514			4.67
Interest-earning bank balances		15,967		260		1.63			13,871		673			4.85
Federal funds sold		15,279		265		1.73			32,966		1,725			5.23
Total interest-earning assets		3,077,124		176,386		5.73			2,975,366		199,339			6.70
Cash and due from banks		56,104							68,963
Bank properties and equipment, net		48,179							44,014
Goodwill and intangible assets, net		149,150							153,957
Other assets		69,855							72,641
Total non-interest-earning assets		323,288							339,575
Total assets	$	3,400,412						$	3,314,941

Interest-bearing liabilities:
Interest-bearing deposit accounts:
Interest-bearing demand deposits	$	874,463		14,355		1.64	%	$	759,855		22,130			2.91	%
Savings deposits		395,288		7,632		1.93			455,096		13,214			2.90
Time deposits		1,110,941		43,865		3.95			1,022,172		48,908			4.78
Total interest-bearing deposit accounts		2,380,692		65,852		2.77			2,237,123		84,252			3.77
Borrowed money:
Federal funds purchased		18,370		421		2.29			2,929		155			5.29
Securities sold under agreements to repurchase - customers		34,976		478		1.37			44,213		1,961			4.44
FHLB advances (4)		50,582		2,127		4.21			87,306		3,764			4.31
Obligation under capital lease		5,221		381		7.30			5,288		387			7.32
Junior subordinated debentures		92,871		5,714		6.15			101,330		8,468			8.36
Total borrowings		202,020		9,121		4.51			241,066		14,735			6.11
Total interest-bearing liabilities		2,582,712		74,973		2.90			2,478,189		98,987			3.99
Non-interest-bearing demand deposits		422,388							453,281
Other liabilities		30,919							28,095
Total liabilities		3,036,019							2,959,565
Shareholders' equity		364,393							355,376
Total liabilities and shareholders' equity	$	3,400,412						$	3,314,941

Net interest income			$	101,413						$	100,352
Interest rate spread (5)						2.83	%						2.71			%
Net interest margin (6)						3.30	%						3.37			%
Ratio of average interest-earning assets to average interest-bearing liabilities						119.14	%						120.06			%

(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.

Sun Bancorp (SNBC) Inactive 8-KFinancial Statements and Exhibits