Sun Bancorp (SNBC) 8-K Sun Bancorp, Inc. Reports First Quarter 2009 Results

News Release

For Immediate Release

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

Sun Bancorp, Inc. Reports First Quarter 2009 Results

VINELAND, NJ, April 28, 2009 – Sun Bancorp, Inc. (NASDAQ:SNBC) reported today a net loss available to common shareholders of $821,000, or $0.04 net loss per diluted share, for the first quarter ended March 31, 2009, compared to net income of $4.2 million, or $0.17 per diluted share, for the first quarter of 2008.  Earnings per share data is adjusted for the 5% common stock dividend declared on April 16, 2009 and payable on May 14, 2009.

The first quarter results include the following:

• During the quarter, the Company completed the sale of 89,310 shares of preferred stock under the U.S. Treasury’s Capital Purchase Program (CPP) of the Troubled Assets Relief Program (TARP) for $89.3 million. The preferred stock carried a 5% annual dividend yield for five years and a 9% annual yield thereafter. In addition, the U.S. Treasury received a warrant to purchase up to 1,543,376 shares of Sun Bancorp, Inc. common stock at an exercise price of $8.68. The impact upon first quarter earnings of the preferred dividend and accretion of the original issuance discount (OID) on the preferred stock for the quarter was $1.2 million, or $0.06 per diluted share.  On April 8, 2009, the Company completed the repurchase of all 89,310 shares of preferred stock. The repurchase price was $89.3 million, plus accrued dividends of approximately $657,000. The Company expects to accelerate the OID in the second quarter of 2009, which will result in a $4.0 million impact to earnings available to common shareholders.  The $4.0 million acceleration of the OID will be combined with the dividend paid at the time of repurchase of $657,000, resulting in a total impact to earnings available to common shareholders of $4.7 million during the second quarter of 2009.

• Net interest income for the quarter of $22.3 million (tax-equivalent basis) decreased $2.8 million, or $0.07 per diluted share, over the comparable prior year period, reducing net interest margin for the quarter to 2.74% compared to 3.35% for the first quarter of 2008.

• Loan loss provision for the quarter of $4.0 million increased $1.9 million, or $0.05 per diluted share, as compared to $2.1 million for the first quarter of 2008.

• There was a pre-tax net impairment charge during the quarter of $278,000, or $0.01 per diluted share, due to further deterioration of underlying collateral on a pooled trust preferred security in the investment portfolio which were previously written down during the fourth quarter of 2008.  The Financial Accounting Standards Board (FASB) issued a FASB Staff Position entitled “Recognition and Presentation of Other-Than-Temporary Impairments” on April 9, 2009 that establishes new requirements for measuring and presenting other-than-temporary impairment (OTTI) charges on both securities classified as available for sale and held to maturity. The Company adopted the new requirements in the first quarter of 2009.

• Non-interest income for the quarter, excluding the net impairment charge of $278,000, of $5.6 million decreased $1.8 million, or $0.05 per diluted share, as compared to $7.4 million for the first quarter of 2008.

“First quarter earnings per share compared to 2008 were reduced by approximately $0.24 per diluted share due to the combined cost of our participation in TARP, a decrease in net interest income, an increase in loan loss provision, a decrease in non-interest income and an OTTI charge,” said Thomas X. Geisel, president and chief executive officer of Sun Bancorp.

“We are carefully working our way through a sustained, unstable economy and our basic underlying operating performance reflects the various challenges we face, many of which are outside the scope of our control,” said Geisel. “Unlike many banks operating in our region, we are continuing to make new loans. Although total loans on a linked quarter basis are essentially level, we continue to experience growth on the commercial and mortgage portfolios, and there is ample volume in the pipelines.”

“Our margin decline over the prior year and linked quarter is largely due to the historic low interest rate environment, the interest sensitivity of our loan portfolio (approximately 50% variable rate indexed to LIBOR and prime) and the inability to reprice liabilities as quickly as asset yields declined,” Geisel added. “For example, 1-month LIBOR averaged 0.46% for the first quarter 2009 compared to 3.33% for the first quarter 2008. This decrease of 2.87% had a significant impact to our margin for the quarter. Under the circumstances, our number one priority is on generating satisfactory returns via improved loan pricing and structure, and being more aggressive on deposit pricing. The positive factor is that we are favorably positioned to benefit when rates eventually begin to rise from current historic low levels.”

“Although deposit competition continues to be intense, deposit growth is up about 8% versus year-ago levels, and up 1.2% on a linked quarter basis,” said Geisel. “Now, more than ever, as we manage our overall funding and liquidity needs, we will continue to balance our deposit growth and interest margin with other funding sources that may be more cost effective in the current environment.”

“Credit quality tracked essentially as expected during the quarter,” Geisel said. “We continue to feel confident in our credit risk assessment process and our allowance for loan losses at quarter end of 1.44% remains adequate.”

The following is an overview of other key financial highlights:

• Total assets were $3.636 billion at March 31, 2009, compared to $3.622 billion at December 31, 2008 and $3.366 billion at March 31, 2008.

• Total loans before allowance for loan losses were $2.738 billion at March 31, 2009, an increase of $187.1 million, or 7.3%, over total loans at March 31, 2008.  Total loans on a linked quarter basis are essentially level.  Commercial loans and residential mortgages increased on average 1.5% and 13.4%, respectively, over the linked quarter, whereas home equity loans decreased on average 2.9%.

• The loan loss provision for the quarter of $4.0 million, or 0.15% of average loans outstanding, compared to $2.1 million, or 0.08% of average loans outstanding, for the comparable prior year period and $7.6 million, or 0.28% of average loans outstanding, for the linked fourth quarter 2008.  The allowance for loan losses to total loans was 1.44% at March 31, 2009 compared to 1.09% at March 31, 2008 and 1.36% at December 31, 2008.  Total non-performing assets were $64.3 million at March 31, 2009, or 2.34% of total loans and real estate owned, compared to $30.7 million, or 1.20%, at March 31, 2008 and $48.8 million, or 1.78%, at December 31, 2008.  Non-accrual loans at March 31, 2009 of $50.5 million increased over the linked quarter by $8.2 million, or 19.5%.  Real estate owned at March 31, 2009 of $10.8 million increased over the linked quarter by $8.9 million primarily as a result of the foreclosure of a previously classified and disclosed non-accrual commercial real estate loan.  The allowance for loan losses to non-performing loans was 73.76% at March 31, 2009, compared to 102.60% at March 31, 2008 and 79.69% at December 31, 2008.  Net charge-offs for the quarter of $1.9 million, or 0.07% of average loans outstanding, compare to $1.2 million, or 0.05% of average loans outstanding, for the comparable prior year quarter and $4.4 million, or 0.16% of average loans outstanding, for the linked fourth quarter 2008.

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• Total deposits were $2.930 billion at March 31, 2009, an increase of $216.3 million, or 8.0%, over total deposits at March 31, 2008 and an increase of 1.2% over the linked fourth quarter 2008.

• Net interest income (tax-equivalent basis) of $22.3 million for the quarter compares to $25.1 million for the comparable prior year period and $25.9 million for the linked fourth quarter 2008. The net interest margin for the quarter of 2.74% compares to 3.35% for the comparable prior year period and 3.26% for the linked fourth quarter 2008. The decreasing margin trend over the prior year and more significantly over the linked quarter is attributable to the reduction in market interest rates, which caused interest-earning assets to re-price downward faster than interest-bearing liabilities. The interest spread over the linked quarter decreased 52 basis points, with a yield decrease of 84 basis points on interest-earning assets offset by a decrease in the cost of interest-bearing liabilities of 32 basis points. This decrease in spread is primarily attributable to the 92 basis points decrease in yield on total loans as approximately 50% of the total loan portfolio is variable rate indexed to LIBOR or prime rate. On average, the 1-month LIBOR and prime rate have decreased quarter-to-quarter 1.77% and 0.82%, respectively.

• Total operating non-interest income for the quarter of $5.6 million decreased $1.6 million, or 21.9%, over the comparable prior year period and decreased $520,000, or 8.5%, over the linked fourth quarter 2008.  The decrease over prior year was attributable to a decrease in services charges on deposit accounts, such as NSF and overdraft fees, of $349,000, a decrease in gain on derivative instruments of $512,000 and a decrease in investment products income of $255,000, all of which was the result of a decline in transaction volume.  In addition, bank owned life insurance (BOLI) income decreased $293,000 due to lower yields earned on the separate account policy.  The decrease over the linked fourth quarter 2008 was primarily due to a decrease in gain on derivative instruments of $284,000 and a decrease in investment products income of $166,000, both the result of a decline in transaction volume, and a decrease in BOLI income of $148,000 due to lower yields earned on the separate account policy.

• Total operating non-interest expense for the quarter of $23.8 million increased $174,000, or 0.7%, over the comparable prior year period and $1.1 million, or 4.9%, over the linked fourth quarter 2008.  The increase over prior year was primarily due to an increase in FDIC insurance of $729,000 as a result of an increase in assessment rates, additional coverage under the Temporary Liquidity Guarantee Program (TLGP) and an overall increase in assessable deposits.  This increase was offset by a decrease in salaries and benefits of $207,000, primarily due to a reduction in expected annual incentives, a decrease in professional fees of $187,000 and advertising expense of $154,000.  The increase over the linked fourth quarter 2008 was primarily attributable to a $1.9 million reduction in the 2008 incentive compensation recognized in the fourth quarter 2008 and an increase in FDIC insurance of $581,000 as a result of an increase in assessment rates, a full quarter of additional coverage under the TLGP and an overall increase in assessable deposits.  These increases were offset with a decrease in professional fees of $367,000 and advertising expense of $304,000.

• The income tax benefit is a result of the pre-tax loss in combination with the relatively large levels of tax-free income earned on tax-exempt securities and bank owned life insurance (BOLI) policies.

• The Company’s pro forma total risk-based capital ratio and leverage ratio at March 31, 2009 for the April 8 repurchase of CPP preferred stock were approximately 11.57% and 8.92%, respectively.  In addition, the Company’s ratio of tangible equity to tangible assets was 6.11% at March 31, 2009 compared to 6.10% at December 31, 2008.

The Company will hold its regularly scheduled conference call on Wednesday, April 29, 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 70 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.

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

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SUN BANCORP, INC. AND SUBSIDIARIES
FINANCIAL HIGHLIGHTS (unaudited)
(Dollars in thousands, except per share amounts)
	For the Three Months Ended
	March 31,						December 31,
	2009			2008			2008
Profitability for the period:
Net interest income	$	21,839		$	24,663		$	25,472
Provision for loan losses		4,000			2,133			7,617
Non-interest income		5,321			7,375			10,076
Non-interest expense		23,817			23,965			22,712
(Loss) Income before income taxes		(657	)		5,940			5,219
Net income		385			4,183			4,253
Net (Loss) income available to common shareholders	$	(821	)	$	4,183		$	4,253
Financial ratios:
Return on average assets (1)		0.04	%		0.50	%		0.49	%
Return on average equity (1)		0.35	%		4.57	%		4.71	%
Return on average tangible equity (1),(2)		0.52	%		7.77	%		7.94	%
Net interest margin (1)		2.74	%		3.35	%		3.26	%
Efficiency ratio		87.69	%		74.80	%		63.89	%
Efficiency ratio, excluding non-operating income and non-operating expense (3)		86.80	%		74.28	%		71.89	%
(Loss) Earnings per common share (4):
Basic	$	(0.04	)	$	0.17		$	0.18
Diluted	$	(0.04	)	$	0.17		$	0.18
Average equity to average assets		12.21	%		11.02	%		10.38	%

	March 31,					December 31,
	2009		2008			2008
At period-end:
Total assets	$	3,635,697		$	3,366,357		$	3,622,126
Total deposits		2,930,084			2,713,756			2,896,364
Loans receivable, net of allowance for loan losses		2,698,612			2,523,058			2,702,516
Investments		435,841			451,727			453,584
Borrowings		50,437			160,366			154,097
Junior subordinated debentures		92,786			92,786			92,786
Shareholders’ equity		447,984			364,242			358,508
Credit quality and capital ratios:
Allowance for loan losses to gross loans		1.44	%		1.09	%		1.36	%
Non-performing assets to gross loans and real estate owned		2.34	%		1.20	%		1.78	%
Allowance for loan losses to non-performing loans		73.76	%		102.60	%		79.69	%
Total capital (to risk-weighted assets) (5):
Sun Bancorp, Inc.		14.41	%		11.70	%		11.37	%
Sun National Bank		11.06	%		10.92	%		10.84	%
Tier 1 capital (to risk-weighted assets) (5):
Sun Bancorp, Inc.		13.16	%		10.71	%		10.17	%
Sun National Bank		9.81	%		9.93	%		9.64	%
Leverage ratio (5):
Sun Bancorp, Inc.		11.81	%		9.67	%		9.58	%
Sun National Bank		8.80	%		8.98	%		9.10	%
Book value (4)	$	15.72		$	15.24		$	15.57
Tangible book value (4)	$	9.41		$	8.96		$	9.20

(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.   Non-interest income for the three months ended March 31, 2009 excludes a net impairment loss on available for sale securities of $278,000 as compared to the exclusion of a gain on the mandatory redemption of Visa stock of $207,000 for the same period in 2008.  Non-interest income for the three months ended December 31, 2008 excludes a net gain of $11.5 million on the sale of branches and an impairment loss on available for sale securities of $7.5 million.  Non-interest expense for the three months ended March 31, 2008 excludes a $250,000 executive sign-on incentive and $72,000 in lease buyout charges.

(4) Data is adjusted for a 5% stock dividend declared in April 2009.

(5) March 31, 2009 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)
	March 31,			December 31,
	2009			2008
ASSETS
Cash and due from banks	$	42,738		$	31,237
Interest-earning bank balances		48,412			26,784
Federal funds sold		-			412
Cash and cash equivalents		91,150			58,433
Investment securities available for sale  (amortized cost - $428,233 and $444,628 at March 31, 2009 and December 31, 2008, respectively)		408,642			423,513
Investment securities held to maturity  (estimated fair value - $12,091 and $13,601 at March 31, 2009 and December 31, 2008, respectively)		12,055			13,765
Loans receivable (net of allowance for loan losses - $39,406 and $37,309 at March 31, 2009 and December 31, 2008, respectively)		2,698,612			2,702,516
Restricted equity investments		15,144			16,306
Bank properties and equipment, net		48,327			48,642
Real estate owned, net		10,834			1,962
Accrued interest receivable		11,192			12,254
Goodwill		127,894			127,894
Intangible assets, net		17,592			18,769
Deferred taxes, net		17,130			16,707
Bank owned life insurance (BOLI)		76,017			75,504
Other assets		101,108			105,861
Total assets	$	3,635,697		$	3,622,126
LIABILITIES & SHAREHOLDERS’ EQUITY
LIABILITIES
Deposits	$	2,930,084		$	2,896,364
Federal funds purchased		-			71,500
Securities sold under agreements to repurchase - customers		14,170			20,327
Advances from the Federal Home Loan Bank of New York (FHLBNY)		16,096			42,081
Securities sold under agreements to repurchase - FHLBNY		15,000			15,000
Obligation under capital lease		5,171			5,189
Junior subordinated debentures		92,786			92,786
Other liabilities		114,406			120,371
Total liabilities		3,187,713			3,263,618
SHAREHOLDERS' EQUITY
Preferred stock, $1 par value, 1,000,000 shares authorized; 89,310 shares of Series A  Preferred Stock, liquidation value $1,000 per share, issued and outstanding at March 31, 2009		85,363			-
Common stock, $1 par value, 50,000,000 shares authorized; 24,074,307 shares issued and 21,967,584 shares outstanding at March 31, 2009; 24,037,431 shares issued and 21,930,708 shares outstanding at December 31, 2008		24,074			24,037
Additional paid-in capital		355,851			351,430
Retained earnings		24,871			22,580
Accumulated other comprehensive loss		(16,013	)		(13,377	)
Treasury stock at cost, 2,106,723 shares at March 31, 2009 and December 31, 2008		(26,162	)		(26,162	)
Total shareholders' equity		447,984			358,508
Total liabilities and shareholders' equity	$	3,635,697		$	3,622,126

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SUN BANCORP, INC.
CONSOLIDATED STATEMENTS OF INCOME (unaudited)
(Dollars in thousands, except share and per share amounts)
	For the Three Months Ended March 31,
	2009			2008
INTEREST INCOME
Interest and fees on loans	$	32,192		$	40,395
Interest on taxable investment securities		4,230			4,183
Interest on non-taxable investment securities		844			761
Dividends on restricted equity investments		173			269
Interest on federal funds sold		-			31
Total interest income		37,439			45,639
INTEREST EXPENSE
Interest on deposits		13,930			18,313
Interest on funds borrowed		484			1,119
Interest on junior subordinated debentures		1,186			1,544
Total interest expense		15,600			20,976
Net interest income		21,839			24,663
PROVISION FOR LOAN LOSSES		4,000			2,133
Net Interest income after provision for loan losses		17,839			22,530
NON-INTEREST INCOME
Service charges on deposit accounts		3,044			3,393
Other service charges		82			78
Gain on sale of loans		345			424
Gain on derivative instruments		127			639
Investment products income		522			777
BOLI income		513			806
Net impairment losses on available for sale securities (total impairment losses on available for sale securities of $1,193,000 and portion of loss in other comprehensive income, before taxes, of $915,000 for the three months ended March 31, 2009)		(278	)		-
Other		966			1,258
Total non-interest income		5,321			7,375
NON-INTEREST EXPENSE
Salaries and employee benefits		11,963			12,420
Occupancy expense		3,135			3,042
Equipment expense		1,538			1,624
Data processing expense		1,010			1,120
Amortization of intangible assets		1,177			1,177
Insurance expense		1,443			669
Professional fees		378			565
Advertising expense		545			699
Real estate owned expense, net		30			9
Other		2,598			2,640
Total non-interest expense		23,817			23,965
(LOSS) INCOME BEFORE INCOME TAXES		(657	)		5,940
INCOME TAX (BENEFIT) EXPENSE		(1,042	)		1,757
NET INCOME		385			4,183
Preferred stock dividend and discount accretion		1,206			-
NET (LOSS) INCOME AVAILABLE TO COMMON SHAREHOLDERS	$	(821	)	$	4,183
Basic earnings per share (1)	$	(0.04	)	$	0.17
Diluted earnings per share (1)	$	(0.04	)	$	0.17
Weighted average shares – basic (1)	23,043,056			23,925,563
Weighted average shares – diluted (1)	23,051,383			24,430,216
(1) Data is adjusted for a 5% stock dividend declared in April 2009.

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SUN BANCORP, INC. AND SUBSIDIARIES
HISTORICAL TRENDS IN QUARTERLY FINANCIAL DATA (unaudited)
(Dollars in thousands)
	2009			2008			2008			2008			2008
	Q1			Q4			Q3			Q2			Q1
Balance sheet at quarter end:
Loans:
Commercial and industrial	$	2,243,698		$	2,234,202		$	2,164,523		$	2,146,163		$	2,061,640
Home equity		268,122			274,360			271,197			264,354			267,023
Second mortgage		78,589			84,388			85,734			83,720			81,090
Residential real estate		69,971			67,473			61,845			56,334			53,616
Other		77,638			79,402			82,840			86,783			87,593
Total gross loans		2,738,018			2,739,825			2,666,139			2,637,354			2,550,962
Allowance for loan losses		(39,406	)		(37,309	)		(34,120	)		(31,490	)		(27,904	)
Net loans		2,698,612			2,702,516			2,632,019			2,605,864			2,523,058
Goodwill		127,894			127,894			127,894			127,894			127,894
Intangible assets, net		17,592			18,769			19,947			21,124			22,301
Total assets		3,635,697			3,622,126			3,425,379			3,424,968			3,366,357
Total deposits		2,930,084			2,896,364			2,873,378			2,782,180			2,713,756
Federal funds purchased		-			71,500			-			29,500			56,000
Securities sold under agreements to repurchase - customers		14,170			20,327			38,359			36,149			36,938
Advances from the Federal Home Loan Bank of New York (FHLBNY)		16,096			42,081			19,551			38,877			47,187
Securities sold under agreements to repurchase - FHLBNY		15,000			15,000			15,000			55,000			15,000
Obligation under capital lease		5,171			5,189			5,207			5,224			5,241
Junior subordinated debentures		92,786			92,786			92,786			92,786			92,786
Total shareholders' equity		447,984			358,508			357,282			360,268			364,242
Quarterly average balance sheet:
Loans:
Commercial and industrial	$	2,229,016		$	2,195,218		$	2,146,204		$	2,099,090		$	2,037,548
Home equity		268,921			275,791			268,178			265,481			267,836
Second mortgage		81,854			85,530			84,404			82,604			80,819
Residential real estate		70,868			62,481			57,471			52,332			50,012
Other		79,324			81,426			84,116			86,198			86,602
Total gross loans		2,729,983			2,700,446			2,640,373			2,585,705			2,522,817
Securities and other interest-earning assets		527,318			476,305			461,276			450,888			469,322
Total interest-earning assets		3,257,301			3,176,751			3,101,649			3,036,593			2,992,139
Total assets		3,644,558			3,483,145			3,422,764			3,368,523			3,326,064
Non-interest-bearing demand deposits		397,237			407,151			435,249			430,568			416,612
Total deposits		2,936,452			2,916,153			2,837,147			2,755,778			2,701,630
Total interest-bearing liabilities		2,694,326			2,679,673			2,600,310			2,539,882			2,509,725
Total shareholders' equity		445,040			361,513			361,895			367,824			366,400
Capital and credit quality measures:
Total capital (to risk-weighted assets) (1):
Sun Bancorp, Inc.		14.41	%		11.37	%		11.67	%		11.50	%		11.70	%
Sun National Bank		11.06	%		10.84	%		11.02	%		10.83	%		10.92	%
Tier 1 capital (to risk-weighted assets) (1):
Sun Bancorp, Inc.		13.16	%		10.17	%		10.51	%		10.42	%		10.71	%
Sun National Bank		9.81	%		9.64	%		9.86	%		9.75	%		9.93	%
Leverage ratio (1):
Sun Bancorp, Inc.		11.81	%		9.58	%		9.56	%		9.57	%		9.67	%
Sun National Bank		8.80	%		9.10	%		8.97	%		8.97	%		8.98	%
Average equity to average assets		12.21	%		10.38	%		10.57	%		10.92	%		11.02	%
Allowance for loan losses to total gross loans		1.44	%		1.36	%		1.28	%		1.19	%		1.09	%
Non-performing assets to total gross loans and real estate owned		2.34	%		1.78	%		1.87	%		1.29	%		1.20	%
Allowance for loan losses to non-performing loans		73.76	%		79.69	%		71.80	%		97.30	%		102.60	%
Other data:
Net charge-offs		(1,903	)		(4,428	)		(1,093	)		(2,941	)		(1,231	)
Non-performing assets:
Non-accrual loans	$	50,481		$	42,233		$	45,940		$	31,323		$	26,567
Loans past due 90 days and accruing		2,945			4,587			1,583			1,042			631
Real estate owned, net		10,834			1,962			2,381			1,714			3,476
Total non-performing assets	$	64,260		$	48,782		$	49,904		$	34,079		$	30,674
(1) March 31, 2009 capital ratios are estimated, subject to regulatory filings.

8

SUN BANCORP, INC. AND SUBSIDIARIES
HISTORICAL TRENDS IN QUARTERLY FINANCIAL DATA (unaudited)
(Dollars in thousands, except share and per share data)
	2009			2008			2008			2008			2008
	Q1			Q4			Q3			Q2			Q1
Profitability for the quarter:
Tax-equivalent interest income	$	37,894		$	43,574		$	43,426		$	43,337		$	46,049
Interest expense		15,600			17,661			18,017			18,319			20,976
Tax-equivalent net interest income		22,294			25,913			25,409			25,018			25,073
Tax-equivalent adjustment		455			441			447			454			410
Provision for loan losses		4,000			7,617			3,723			6,527			2,133
Non-interest income excluding net gain on sale of branches and net impairment losses on available for sale securities		5,599			6,119			7,046			7,802			7,375
Net gain on sale of branches		-			11,454			-			-			-
Net impairment losses on available for sale securities		(278	)		(7,497	)		-			-			-
Non-interest expense excluding amortization of intangible assets		22,640			21,534			21,873			21,735			22,788
Amortization of intangible assets		1,177			1,178			1,177			1,178			1,177
(Loss) Income before income taxes		(657	)		5,219			5,235			2,926			5,940
Income tax (benefit) expense		(1,042	)		966			1,106			597			1,757
Net income		385			4,253			4,129			2,329			4,183
Net (loss) income available to common shareholders	$	(821	)	$	4,253		$	4,129		$	2,329		$	4,183
Financial ratios:
Return on average assets (1)		0.04	%		0.49	%		0.48	%		0.28	%		0.50	%
Return on average equity (1)		0.35	%		4.71	%		4.56	%		2.53	%		4.57	%
Return on average tangible equity (1),(2)		0.52	%		7.94	%		7.74	%		4.27	%		7.77	%
Net interest margin (1)		2.74	%		3.26	%		3.28	%		3.30	%		3.35	%
Efficiency ratio		87.69	%		63.89	%		72.01	%		70.79	%		74.80	%
Efficiency ratio, excluding non-operating income and non-operating expense		86.80	%		71.89	%		72.01	%		70.79	%		74.28	%
Per share data (3):
(Loss) Earnings per common share:
Basic	$	(0.04	)	$	0.18		$	0.18		$	0.10		$	0.17
Diluted	$	(0.04	)	$	0.18		$	0.17		$	0.10		$	0.17
Book value	$	15.72		$	15.57		$	15.18		$	15.25		$	15.24
Tangible book value	$	9.41		$	9.20		$	8.90		$	8.94		$	8.96
Average basic shares (3)	23,043,056			23,323,693			23,512,826			23,830,980			23,925,563
Average diluted shares (3)	23,051,383			23,410,606			24,084,540			24,371,330			24,430,216
Operating non-interest income:
Service charges on deposit accounts	$	3,044		$	3,263		$	3,701		$	3,561		$	3,393
Other service charges		82			82			82			75			78
Gain on sale of loans		345			204			286			411			424
Gain on derivative instruments		127			411			491			1,037			639
Investment products income		522			688			728			848			777
BOLI income		513			661			778			772			806
Other income		966			810			980			1,098			1,051
Total operating non-interest income		5,599			6,119			7,046			7,802			7,168
Non-operating income (4):
Net gain on sale of branches		-			11,454			-			-			-
Net impairment losses on available for sale securities		(278	)		(7,497	)		-			-			-
Gain on Visa stock redemption		-			-			-			-			207
Total non-operating income		(278	)		3,957			-			-			207
Total non-interest income	$	5,321		$	10,076		$	7,046		$	7,802		$	7,375
Operating non-interest expense:
Salaries and employee benefits	$	11,963		$	10,643		$	12,277		$	12,283		$	12,170
Occupancy expense		3,135			2,919			2,912			2,810			2,970
Equipment expense		1,538			1,609			1,522			1,666			1,624
Data processing expense		1,010			1,120			1,154			1,065			1,120
Amortization of intangible assets		1,177			1,178			1,177			1,178			1,177
Insurance expense		1,443			901			745			728			669
Professional fees		378			745			542			483			565
Advertising expense		545			849			336			484			699
Real estate owned expense (income), net		30			(116	)		13			(534	)		9
Other expenses		2,598			2,864			2,372			2,750			2,640
Total operating non-interest expense		23,817			22,712			23,050			22,913			23,643
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	$	23,817		$	22,712		$	23,050		$	22,913		$	23,965
(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 2009.
(4) Amount consists of items which the Company believes are not a result of normal operations.

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SUN BANCORP, INC. AND SUBSIDIARIES
AVERAGE BALANCE SHEETS (unaudited)
(Dollars in thousands)
	For the Three Months Ended March 31, 2009							For the Three Months Ended March 31, 2008
	Average		Income/		Yield/			Average		Income/		Yield/
	Balance		Expense		Cost			Balance		Expense		Cost
Interest-earning assets:
Loans receivable (1),(2):
Commercial and industrial	$	2,229,016	$	25,077		4.50	%	$	2,037,548	$	32,506		6.38	%
Home equity		268,921		3,500		5.21			267,836		4,155		6.21
Second mortgage		81,854		1,307		6.39			80,819		1,318		6.52
Residential real estate		70,868		1,070		6.04			50,012		818		6.54
Other		79,324		1,238		6.24			86,602		1,598		7.38
Total loans receivable		2,729,983		32,192		4.72			2,522,817		40,395		6.40
Investment securities (3)		466,898		5,666		4.85			455,366		5,536		4.86
Interest-earning bank balances		60,040		36		0.24			10,090		87		3.45
Federal funds sold		380		-		-			3,866		31		3.21
Total interest-earning assets		3,257,301		37,894		4.65			2,992,139		46,049		6.16
Cash and due from banks		49,135							56,555
Bank properties and equipment, net		48,471							47,893
Goodwill and intangible assets, net		146,210							150,923
Other assets		143,441							78,554
Total non-interest-earning assets		387,257							333,925
Total assets	$	3,644,558						$	3,326,064
Interest-bearing liabilities:
Interest-bearing deposit accounts:
Interest-bearing demand deposits	$	983,372		2,746		1.12	%	$	754,432		3,319		1.76	%
Savings deposits		297,590		846		1.14			461,949		2,806		2.43
Time deposits		1,258,253		10,338		3.29			1,068,637		12,188		4.56
Total interest-bearing deposit accounts		2,539,215		13,930		2.19			2,285,018		18,313		3.21
Borrowed money:
Federal funds purchased		3,561		5		0.56			17,747		131		2.95
Securities sold under agreements to repurchase - customers		16,610		10		0.24			38,700		233		2.41
FHLBNY advances (4)		36,976		374		4.05			69,887		659		3.77
Obligation under capital lease		5,178		95		7.34			5,247		96		7.32
Junior subordinated debentures		92,786		1,186		5.11			93,126		1,544		6.63
Total borrowings		155,111		1,670		4.31			224,707		2,663		4.74
Total interest-bearing liabilities		2,694,326		15,600		2.32			2,509,725		20,976		3.34
Non-interest-bearing demand deposits		397,237							416,612
Other liabilities		107,955							33,327
Total liabilities		3,199,518							2,959,664
Shareholders' equity		445,040							366,400
Total liabilities and shareholders' equity	$	3,644,558						$	3,326,064
Net interest income			$	22,294						$	25,073
Interest rate spread (5)						2.33	%						2.82	%
Net interest margin (6)						2.74	%						3.35	%
Ratio of average interest-earning assets to average interest-bearing liabilities						120.89	%						119.22	%
(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 FHLBNY and Securities sold under agreements to repurchase - FHLBNY.
(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