Sun Bancorp 8K , Inc. Reports Third Quarter 2009 Results | SNBC 27 Oct 09

News Release

For Immediate Release

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

Sun Bancorp, Inc. Reports Third Quarter 2009 Results

VINELAND, NJ – October 27, 2009 – Sun Bancorp, Inc. (NASDAQ: SNBC) reported today a net loss available to common shareholders of $6.5 million, or $0.28 net loss per diluted share, for the third quarter ended September 30, 2009, compared to net income of $4.1 million, or $0.17 per diluted share, for the third quarter of 2008.

For the nine months ended September 30, 2009, the Company reported a net loss available to common shareholders of $16.1 million, or $0.70 net loss per diluted share, compared to net income of $10.6 million, or $0.44 per diluted share, in the prior year period.

“We believe we are moving proactively beyond the phase where the identification of problem assets inhibits forward momentum,” said Thomas X. Geisel, president and chief executive officer. “While we have an experienced group who are focused on managing asset quality, the majority of our employees continue to seek and deliver on opportunities to grow the business in these still challenging times. Our loan loss provisions over the last several quarters and the increased level of charge-offs have obviously had a negative impact on our financial performance, but we expect these decisive actions will help to move us through this cycle as rapidly as possible and positively position us for 2010. Our goal is to focus all of the Company’s resources on growing our position as the second largest banking company headquartered in New Jersey.”

“In terms of our underlying operating performance, we have been doing very well,” said Geisel. “Third quarter net interest income of $27.0 million (tax-equivalent basis) was up, versus $24.3 million for the linked quarter and $22.3 million for first quarter of 2009. Importantly, the net interest margin, the main driver of future profitability, increased to 3.36%, as compared to 3.01% for the linked quarter and 2.74% for first quarter 2009.”

“Our cost of average interest-bearing deposits for the third quarter (1.59%) decreased 36 basis points over the linked quarter, 60 basis points over the first quarter 2009 and 106 basis points over third quarter 2008. And the return we produced (yield) on average loans for the third quarter was 4.88%, an increase of 5 basis points over the linked quarter and 16 basis points over first quarter 2009. These trends indicate we are successfully managing in the right direction the basic fundamentals of good community banking, despite a continuing tough operating environment,” said Geisel.

As previously announced, results for the third quarter 2009 include the following charges:

The Company recorded a $16.2 million provision for loan losses, or $0.41 per diluted share, increasing the allowance for loan losses to 1.70% of outstanding loans at September 30, 2009 as compared to 1.62% at June 30, 2009 and 1.36% at December 31, 2008. The provision for loan losses for the third quarter was 0.59% of average loans as compared to 0.25% of average loans for the linked second quarter 2009 and 0.14% of average loans for the comparable prior year quarter. Net charge-offs during the third quarter were $14.5 million, or 0.53% of average loans outstanding, as compared to $2.0 million, or 0.07% of average loans outstanding, for the linked quarter and $1.1 million, or 0.04% of average loans outstanding, for the comparable prior year quarter.

The Company recognized a pre-tax impairment charge during the quarter of $1.9 million, or $0.05 per diluted share, due to further deterioration of underlying collateral on a pooled trust preferred security. This security, which had an original cost basis of $7.0 million, had been previously written down $5.1 million in accordance with the Financial Accounting Standards Board (FASB) Accounting Standards Codification (ASC) guidance on the recognition and presentation of other-than-temporary impairments, which the Company previously adopted in the first quarter of 2009.

·	The Company recognized a pre-tax write-down of $800,000, or $0.02 per diluted share, on the value of a commercial warehouse that is currently the largest property held as Real Estate Owned.

Selected core operating highlights reflecting favorable performance in the third quarter include:

·	Third quarter net interest income of $27.0 million (tax-equivalent basis) compared favorably to $24.3 million for the linked quarter and $22.3 million for first quarter 2009. Net interest income was $25.4 million for third quarter 2008.

The third quarter net interest margin increased to 3.36%, as compared to 3.01% for the linked quarter and 2.74% for first quarter 2009. The net interest margin was 3.28% for the third quarter 2008. The margin increase over the two quarters since year-end 2008 reflects the Company’s focus on margin improvement initiatives on both sides of the balance sheet.

·	The cost of average interest-bearing deposits for the third quarter of 1.59% decreased 36 basis points from 1.95% for the linked quarter, 60 basis points from 2.19% for first quarter 2009 and 106 basis points from 2.65% for third quarter 2008.

·	The yield on average loans for the third quarter of 4.88% increased 5 basis points from 4.83% for the linked quarter and 16 basis points from 4.72% for first quarter 2009.

Other key financial highlights include:

·	Total assets were $3.55 billion at September 30, 2009, as compared to $3.43 billion at September 30, 2008 and $3.56 billion at June 30, 2009.

Total loans before allowance for loan losses were $2.71 billion at September 30, 2009, as compared to $2.67 billion at September 30, 2008 and $2.73 billion at June 30, 2009. Commercial loans, on average, were essentially level on a linked quarter basis, residential mortgages increased on average 1.1% and home equity loans decreased on average 2.3%.

Total non-performing assets were $94.1 million at September 30, 2009, or 3.46% of total loans and real estate owned, compared to $74.1 million, or 2.70%, at June 30, 2009 and $49.9 million, or 1.87%, at September 30, 2008. The allowance for loan losses to non-performing loans was 54.58% at September 30, 2009, as compared to 69.82% at June 30, 2009 and 71.80% at September 30, 2008.

Total deposits were $2.93 billion at September 30, 2009, an increase of $59.5 million, or 2.1%, from September 30, 2008 and $57.4 million, or 2.0%, from June 30, 2009. Average total deposits declined $29.1 million over the linked quarter as average certificates of deposit decreased $172.3 million, offset by an increase in average core deposits of $143.2 million, or 8.2%.

The third quarter net interest margin was 3.36%, as compared to 3.01% for the linked quarter and 3.28% for third quarter 2008. The interest rate spread as compared to the linked second quarter increased 38 basis points, with a yield increase of 3 basis points on interest-earnings assets, offset by a decrease in the cost of interest-bearing liabilities of 35 basis points. Average interest-earning assets for the quarter of $3.22 billion remained relatively stable over the linked quarter.

Total operating non-interest income for the quarter of $6.4 million, which excludes the impairment charge of $1.9 million, increased $114,000, or 1.8%, over the linked quarter, which excludes an impairment charge of $4.6 million, and decreased $642,000, or 9.1%, over the comparable prior year period. The increase over the linked quarter was primarily due to an increase in investment products income of $138,000 and an increase in service charges on deposit accounts, such as NSF and overdraft fees, of $54,000, offset by a decrease in gain on derivative instruments of $85,000 due to a planned decline in transaction volume. The decrease over the prior year period was primarily attributable to a reduction in service charges on deposit accounts of $551,000, a decrease in gain on derivative instruments of $491,000 due to a planned decline in transaction volume and a decrease in bank owned life insurance (BOLI) income of $203,000 due to lower yields earned on the separate account policy. These decreases were offset with an increase in gain on sale of loans of $425,000 and an increase in investment products income of $166,000.

Total non-interest expense for the quarter of $26.9 million decreased $783,000, or 2.8%, over the linked quarter, and increased $3.8 million, or 16.6%, over the comparable prior year period. The decrease over the linked quarter was attributable to a reduction in insurance expense of $1.8 million as a result of the $1.6 million Federal Deposit Insurance Corporation (FDIC) special assessment recognized in the second quarter and a decrease in advertising expense of $620,000 due to the second quarter “Switch to Sun” campaign. These decreases were offset by an increase in salaries and benefits of $938,000 primarily due to severance and other related charges, and an increase in cost of real estate owned of $761,000 primarily due to an $800,000 write-down on the carrying value of one commercial property. The increase over the prior year period was attributable to an increase in salaries and benefits of $1.9 million due to the addition of several key management and business line staff, and severance and other related charges, an increase in cost of real estate owned of $841,000 primarily due to the aforementioned $800,000 write-down recognized on the carrying value of one commercial property and an increase in insurance expense of $774,000 primarily due to an increase in FDIC assessment rates, additional coverage under the Temporary Liquidity Guarantee Program (TLGP) and an overall increase in assessable deposits.

·	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 BOLI policies.

·	The Company’s ratio of tangible equity to tangible assets was 6.45% at September 30, 2009, as compared to 6.33% at June 30, 2009 and 6.39% at September 30, 2008.

The Company will hold its regularly scheduled conference call on Wednesday, October 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 $3.5 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 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 Nine Months Ended
	September 30,						September 30,
	2009			2008			2009			2008
Profitability for the period:
Net interest income	$	26,466		$	24,962		$	72,089		$	74,189
Provision for loan losses		16,237			3,723			27,187			12,383
Non-interest income		4,476			7,046			11,529			22,223
Non-interest expense		26,867			23,050			78,334			69,928
(Loss) income before income taxes		(12,162	)		5,235			(21,903	)		14,101
Net (loss) income		(6,542	)		4,129			(10,791	)		10,641
Net (loss) income available to common shareholders	$	(6,542	)	$	4,129		$	(16,142	)	$	10,641

Financial ratios:
Return on average assets (1)		(0.73)	%		0.48	%		(0.40)	%		0.42	%
Return on average equity (1)		(7.16)	%		4.56	%		(3.66)	%		3.88	%
Return on average tangible equity (1),(2)		(11.81)	%		7.74	%		(5.80)	%		6.58	%
Net interest margin (1)		3.36	%		3.28	%		3.03	%		3.31	%
Efficiency ratio		86.83	%		72.01	%		93.68	%		72.53	%
Efficiency ratio, excluding non-operating income and non-operating expense (3)		81.74	%		72.01	%		86.67	%		72.35	%

Earnings per common share (4):
Basic	$	(0.28	)	$	0.18		$	(0.70	)	$	0.45
Diluted	$	(0.28	)	$	0.17		$	(0.70	)	$	0.44

Average equity to average assets		10.17	%		10.57	%		10.88	%		10.83	%

	September 30,					December 31,
	2009		2008			2008
At period-end:
Total assets	$	3,545,639		$	3,425,379		$	3,622,126
Total deposits		2,932,880			2,873,378			2,896,364
Loans receivable, net of allowance for loan losses		2,663,697			2,632,019			2,702,516
Investments		428,696			396,117			453,584
Borrowings		65,873			78,117			154,097
Junior subordinated debentures		92,786			92,786			92,786
Shareholders’ equity		362,457			357,282			358,508

Credit quality and capital ratios:
Allowance for loan losses to gross loans		1.70	%		1.28	%		1.36	%
Non-performing assets to gross loans and real estate owned		3.46	%		1.87	%		1.78	%
Allowance for loan losses to non-performing loans		54.58	%		71.80	%		79.69	%

Total capital (to risk-weighted assets) (5):
Sun Bancorp, Inc.		11.60	%		11.67	%		11.37	%
Sun National Bank		11.11	%		11.02	%		10.84	%
Tier 1 capital (to risk-weighted assets) (5):
Sun Bancorp, Inc.		10.34	%		10.51	%		10.17	%
Sun National Bank		9.85	%		9.86	%		9.64	%
Leverage ratio (5):
Sun Bancorp, Inc.		9.21	%		9.56	%		9.58	%
Sun National Bank		8.77	%		8.97	%		9.10	%

Book value (4)	$	15.63		$	15.18		$	15.57
Tangible book value (4)	$	9.46		$	8.90		$	9.20

(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. Non-interest income for the three and nine months ended September 30, 2009 exclude a net impairment loss on available for sale securities of $1.9 million and $6.8 million, respectively. Non-interest income for the nine months ended September 30, 2008 excludes a gain on the mandatory redemption of Visa stock of $207,000. 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.

(4) Data is adjusted for a 5% stock dividend issued in May 2009.

(5) September 30, 2009 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)
	September 30,			December 31,
	2009			2008
ASSETS
Cash and due from banks	$	57,893		$	31,237
Interest-earning bank balances		2,361			26,784
Federal funds sold		-			412
Cash and cash equivalents		60,254			58,433
Investment securities available for sale (amortized cost - $405,466 and $444,628 at September 30, 2009 and December 31, 2008, respectively)		405,141			423,513
Investment securities held to maturity (estimated fair value - $8,221 and $13,601 at September 30, 2009 and December 31, 2008, respectively)		8,052			13,765
Loans receivable (net of allowance for loan losses - $46,067 and $37,309 at September 30, 2009 and December 31, 2008, respectively)		2,663,697			2,702,516
Restricted equity investments		15,503			16,306
Bank properties and equipment, net		52,537			48,642
Real estate owned, net		9,667			1,962
Accrued interest receivable		11,166			12,254
Goodwill		127,894			127,894
Intangible assets, net		15,237			18,769
Deferred taxes, net		13,965			16,707
Bank owned life insurance (BOLI)		77,153			75,504
Other assets		85,373			105,861
Total assets	$	3,545,639		$	3,622,126

LIABILITIES & SHAREHOLDERS’ EQUITY
LIABILITIES
Deposits	$	2,932,880		$	2,896,364
Federal funds purchased		6,000			71,500
Securities sold under agreements to repurchase - customers		21,018			20,327
Advances from the Federal Home Loan Bank of New York (FHLBNY)		15,512			42,081
Securities sold under agreements to repurchase - FHLBNY		15,000			15,000
Obligations under capital lease		8,343			5,189
Junior subordinated debentures		92,786			92,786
Other liabilities		91,643			120,371
Total liabilities		3,183,182			3,263,618

SHAREHOLDERS' EQUITY
Preferred stock, $1 par value, 1,000,000 shares authorized; none issued		-			-
Common stock, $1 par value, 50,000,000 shares authorized; 25,295,153 shares issued and 23,188,430 shares outstanding at September 30, 2009; 24,037,431 shares issued and 21,930,708 shares outstanding at December 31, 2008		25,295			24,037
Additional paid-in capital		361,571			351,430
Retained earnings		1,743			22,580
Accumulated other comprehensive gain (loss)		31			(13,377	)
Deferred compensation plan trust		(21	)		-
Treasury stock at cost, 2,106,723 shares at September 30, 2009 and December 31, 2008		(26,162	)		(26,162	)
Total shareholders' equity		362,457			358,508
Total liabilities and shareholders' equity	$	3,545,639		$	3,622,126

SUN BANCORP, INC.
CONDENSED CONSOLIDATED STATEMENTS OF INCOME (Unaudited)
(Dollars in thousands, except share and per share amounts)
	For the Three Months Ended September 30,							For the Nine Months Ended September 30,
	2009				2008			2009				2008
INTEREST INCOME
Interest and fees on loans	$		33,299		$		37,819	$		98,487		$		116,104
Interest on taxable investment securities			3,405				3,943			11,341				11,933
Interest on non-taxable investment securities			969				830			2,695				2,434
Dividends on restricted equity investments			219				250			609				796
Interest on federal funds sold			-				137			-				234
Total interest income			37,892				42,979			113,132				131,501
INTEREST EXPENSE
Interest on deposits			9,797				15,905			36,132				50,175
Interest on funds borrowed			548				753			1,511				2,880
Interest on junior subordinated debentures			1,081				1,359			3,400				4,257
Total interest expense			11,426				18,017			41,043				57,312
Net interest income			26,466				24,962			72,089				74,189
PROVISION FOR LOAN LOSSES			16,237				3,723			27,187				12,383
Net Interest income after provision for loan losses			10,229				21,239			44,902				61,806
NON-INTEREST INCOME
Service charges on deposit accounts			3,150				3,701			9,290				10,655
Other service charges			85				82			246				235
Gain on sale of loans			711				286			1,749				1,121
Gain on derivative instruments			-				491			212				2,167
Investment products income			894				728			2,172				2,353
BOLI income			575				778			1,649				2,356
Net impairment losses on available for sale securities:
Total impairment losses		(1,928	)			-			(6,764	)			-
Portion of loss recognized in other comprehensive income (before taxes)		-				-			-				-
Net impairment losses recognized in earnings			(1,928	)			-			(6,764	)			-
Other			989				980			2,975				3,336
Total non-interest income			4,476				7,046			11,529				22,223
NON-INTEREST EXPENSE
Salaries and employee benefits			14,154				12,277			39,333				36,980
Occupancy expense			2,689				2,912			8,606				8,764
Equipment expense			1,619				1,522			4,842				4,812
Data processing expense			980				1,154			3,042				3,339
Amortization of intangible assets			1,177				1,177			3,532				3,532
Insurance expense			1,519				745			6,292				2,142
Professional fees			595				542			1,480				1,590
Advertising expense			251				336			1,667				1,519
Real estate owned expense, net			854				13			1,127				(512	)
Other			3,029				2,372			8,413				7,762
Total non-interest expense			26,867				23,050			78,334				69,928
(LOSS) INCOME BEFORE INCOME TAXES			(12,162	)			5,235			(21,903	)			14,101
INCOME TAX (BENEFIT) EXPENSE			(5,620	)			1,106			(11,112	)			3,460
NET (LOSS) INCOME			(6,542	)			4,129			(10,791	)			10,641
Preferred stock dividend and discount accretion			-				-			5,351				-
NET (LOSS) INCOME AVAILABLE TO COMMON SHAREHOLDERS	$		(6,542	)	$		4,129	$		(16,142	)	$		10,641

Basic (loss) earnings per share (1)	$		(0.28	)	$		0.18	$		(0.70	)	$		0.45
Diluted (loss) earnings per share (1)	$		(0.28	)	$		0.17	$		(0.70	)	$		0.44
Weighted average shares – basic (1)			23,162,992				23,512,826	23,104,419				23,755,567
Weighted average shares – diluted (1)			23,162,992				24,084,540	23,104,419				24,355,870
(1) Data is adjusted for a 5% stock dividend issued in May 2009.

SUN BANCORP, INC. AND SUBSIDIARIES
HISTORICAL TRENDS IN QUARTERLY FINANCIAL DATA (Unaudited)
(Dollars in thousands)
	2009			2009			2009			2008			2008
	Q3			Q2			Q1			Q4			Q3
Balance sheet at quarter end:
Loans:
Commercial and industrial	$	2,234,616		$	2,240,368		$	2,243,698		$	2,234,202		$	2,164,523
Home equity		261,206			265,407			268,122			274,360			271,197
Second mortgage		71,578			73,856			78,589			84,388			85,734
Residential real estate		72,292			79,627			69,971			67,473			61,845
Other		70,072			74,714			77,638			79,402			82,840
Total gross loans		2,709,764			2,733,972			2,738,018			2,739,825			2,666,139
Allowance for loan losses		(46,067	)		(44,316	)		(39,406	)		(37,309	)		(34,120	)
Net loans		2,663,697			2,689,656			2,698,612			2,702,516			2,632,019
Goodwill		127,894			127,894			127,894			127,894			127,894
Intangible assets, net		15,237			16,414			17,592			18,769			19,947
Total assets		3,545,639			3,561,110			3,635,697			3,622,126			3,425,379
Total deposits		2,932,880			2,875,502			2,930,084			2,896,364			2,873,378
Federal funds purchased		6,000			87,500			-			71,500			-
Securities sold under agreements to repurchase - customers		21,018			17,398			14,170			20,327			38,359
Advances from FHLBNY		15,512			15,805			16,096			42,081			19,551
Securities sold under agreements to repurchase - FHLBNY		15,000			15,000			15,000			15,000			15,000
Obligations under capital lease		8,343			8,383			5,171			5,189			5,207
Junior subordinated debentures		92,786			92,786			92,786			92,786			92,786
Total shareholders' equity		362,457			360,660			447,984			358,508			357,282
Quarterly average balance sheet:
Loans:
Commercial and industrial	$	2,247,234		$	2,236,745		$	2,229,016		$	2,195,218		$	2,146,204
Home equity		263,494			268,276			268,921			275,791			268,178
Second mortgage		72,830			75,967			81,854			85,530			84,404
Residential real estate		76,626			75,812			70,868			62,481			57,471
Other		70,790			75,133			79,324			81,426			84,116
Total gross loans		2,730,974			2,731,933			2,729,983			2,700,446			2,640,373
Securities and other interest-earning assets		486,274			491,348			527,318			476,305			461,276
Total interest-earning assets		3,217,248			3,223,281			3,257,301			3,176,751			3,101,649
Total assets		3,593,037			3,611,679			3,644,558			3,483,145			3,422,764
Non-interest-bearing demand deposits		476,478			431,836			397,237			407,151			435,249
Total deposits		2,946,281			2,975,358			2,936,452			2,916,153			2,837,147
Total interest-bearing liabilities		2,663,226			2,705,069			2,694,326			2,679,673			2,600,310
Total shareholders' equity		365,440			370,196			445,040			361,513			361,895

Capital and credit quality measures:
Total capital (to risk-weighted assets) (1):
Sun Bancorp, Inc.		11.60	%		11.62	%		14.32	%		11.37	%		11.67	%
Sun National Bank		11.11	%		11.15	%		10.99	%		10.84	%		11.02	%
Tier 1 capital (to risk-weighted assets) (1):
Sun Bancorp, Inc.		10.34	%		10.37	%		13.07	%		10.17	%		10.51	%
Sun National Bank		9.85	%		9.90	%		9.74	%		9.64	%		9.86	%
Leverage ratio (1):
Sun Bancorp, Inc.		9.21	%		9.29	%		11.81	%		9.58	%		9.56	%
Sun National Bank		8.77	%		8.88	%		8.80	%		9.10	%		8.97	%

Average equity to average assets		10.17	%		10.25	%		12.21	%		10.38	%		10.57	%
Allowance for loan losses to total gross loans		1.70	%		1.62	%		1.44	%		1.36	%		1.28	%
Non-performing assets to total gross loans and real estate owned		3.46	%		2.70	%		2.34	%		1.78	%		1.87	%
Allowance for loan losses to non-performing loans		54.58	%		69.82	%		73.76	%		79.69	%		71.80	%

Other data:
Net charge-offs		(14,486	)		(2,040	)		(1,903	)		(4,428	)		(1,093	)
Non-performing assets:
Non-accrual loans	$	80,333		$	55,801		$	50,481		$	42,233		$	45,940
Loans past due 90 days and accruing		4,067			7,675			2,945			4,587			1,583
Real estate owned, net		9,667			10,620			10,834			1,962			2,381
Total non-performing assets	$	94,067		$	74,096		$	64,260		$	48,782		$	49,904
(1) September 30, 2009 capital ratios are estimated, subject to regulatory filings.

SUN BANCORP, INC. AND SUBSIDIARIES
HISTORICAL TRENDS IN QUARTERLY FINANCIAL DATA (Unaudited)
(Dollars in thousands, except share and per share data)
	2009			2009			2009			2008			2008
	Q3			Q2			Q1			Q4			Q3
Profitability for the quarter:
Tax-equivalent interest income	$	38,413		$	38,276		$	37,894		$	43,574		$	43,426
Interest expense		11,426			14,017			15,600			17,661			18,017
Tax-equivalent net interest income		26,987			24,259			22,294			25,913			25,409
Tax-equivalent adjustment		521			475			455			441			447
Provision for loan losses		16,237			6,950			4,000			7,617			3,723
Non-interest income excluding net gain on sale of branches and net impairment losses on available for sale securities		6,404			6,290			5,599			6,119			7,046
Net gain on sale of branches		-			-			-			11,454			-
Net impairment losses on available for sale securities		(1,928	)		(4,558	)		(278	)		(7,497	)		-
Non-interest expense excluding amortization of intangible assets		25,690			26,472			22,640			21,534			21,873
Amortization of intangible assets		1,177			1,178			1,177			1,178			1,177
(Loss) income before income taxes		(12,162	)		(9,084	)		(657	)		5,219			5,235
Income tax (benefit) expense		(5,620	)		(4,450	)		(1,042	)		966			1,106
Net (loss) income		(6,542	)		(4,634	)		385			4,253			4,129
Net (loss) income available to common shareholders	$	(6,542	)	$	(8,780	)	$	(820	)	$	4,253		$	4,129
Financial ratios:
Return on average assets (1)		(0.73)	%		(0.51)	%		0.04	%		0.49	%		0.48	%
Return on average equity (1)		(7.16)	%		(5.01)	%		0.35	%		4.71	%		4.56	%
Return on average tangible equity (1),(2)		(11.81)	%		(8.23)	%		0.52	%		7.94	%		7.74	%
Net interest margin (1)		3.36	%		3.01	%		2.74	%		3.26	%		3.28	%
Efficiency ratio		86.83	%		108.36	%		87.69	%		63.89	%		72.01	%
Efficiency ratio, excluding non-operating income and non-operating expense		81.74	%		91.94	%		86.80	%		71.89	%		72.01	%
Per share data (3):
(Loss) earnings per common share:
Basic	$	(0.28	)	$	(0.38	)	$	(0.04	)	$	0.18		$	0.18
Diluted	$	(0.28	)	$	(0.38	)	$	(0.04	)	$	0.18		$	0.17
Book value	$	15.63		$	15.59		$	15.72		$	15.57		$	15.18
Tangible book value	$	9.46		$	9.35		$	9.41		$	9.20		$	8.90
Average basic shares (3)	23,162,992			23,103,975			23,043,056			23,323,693			23,512,826
Average diluted shares (3)	23,162,992			23,103,975			23,043,056			23,410,606			24,084,540
Operating non-interest income:
Service charges on deposit accounts	$	3,150		$	3,096		$	3,044		$	3,263		$	3,701
Other service charges		85			79			82			82			82
Gain on sale of loans		711			693			345			204			286
Gain on derivative instruments		-			85			127			411			491
Investment products income		894			756			522			688			728
BOLI income		575			561			513			661			778
Other income		989			1,020			966			810			980
Total operating non-interest income		6,404			6,290			5,599			6,119			7,046
Non-operating income (4):
Net gain on sale of branches		-			-			-			11,454			-
Net impairment losses on available for sale securities recognized in earnings		(1,928	)		(4,558	)		(278	)		(7,497	)		-
Total non-operating income		(1,928	)		(4,558	)		(278	)		3,957			-
Total non-interest income	$	4,476		$	1,732		$	5,321		$	10,076		$	7,046
Operating non-interest expense:
Salaries and employee benefits	$	14,154		$	13,216		$	11,963		$	10,643		$	12,277
Occupancy expense		2,689			2,782			3,135			2,919			2,912
Equipment expense		1,619			1,685			1,538			1,609			1,522
Data processing expense		980			1,052			1,010			1,120			1,154
Amortization of intangible assets		1,177			1,178			1,177			1,178			1,177
Insurance expense		1,519			3,330			1,443			901			745
Professional fees		595			507			378			745			542
Advertising expense		251			871			545			849			336
Real estate owned expense (income), net		854			93			180			(116	)		13
Other expenses		3,029			2,936			2,448			2,864			2,372
Total operating non-interest expense		26,867			27,650			23,817			22,712			23,050
Total non-interest expense	$	26,867		$	27,650		$	23,817		$	22,712		$	23,050
(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 issued in May 2009.
(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 September 30, 2009							For the Three Months Ended September, 2008
	Average		Income/		Yield/			Average		Income/		Yield/
	Balance		Expense		Cost			Balance		Expense		Cost
Interest-earning assets:
Loans receivable (1),(2):
Commercial and industrial	$	2,247,234	$	26,590		4.73	%	$	2,146,204	$	30,243		5.64	%
Home equity		263,494		3,248		4.93			268,178		3,800		5.67
Second mortgage		72,830		1,182		6.49			84,404		1,384		6.56
Residential real estate		76,626		1,099		5.74			57,471		911		6.34
Other		70,790		1,180		6.67			84,116		1,481		7.04
Total loans receivable		2,730,974		33,299		4.88			2,640,373		37,819		5.73
Investment securities (3)		439,661		5,091		4.63			422,897		5,423		5.13
Interest-earning bank balances		46,613		23		0.20			9,418		47		2.00
Federal funds sold		-		-		-			28,961		137		1.89
Total interest-earning assets		3,217,248		38,413		4.78			3,101,649		43,426		5.60
Cash and due from banks		46,724							57,463
Bank properties and equipment, net		52,058							48,204
Goodwill and intangible assets, net		143,868							148,577
Other assets		133,139							66,871
Total non-interest-earning assets		375,789							321,115
Total assets	$	3,593,037						$	3,422,764

Interest-bearing liabilities:
Interest-bearing deposit accounts:
Interest-bearing demand deposits	$	1,112,999		2,658		0.96	%	$	927,312		4,180		1.80	%
Savings deposits		299,590		693		0.93			378,699		1,652		1.74
Time deposits		1,057,214		6,446		2.44			1,095,887		10,073		3.68
Total interest-bearing deposit accounts		2,469,803		9,797		1.59			2,401,898		15,905		2.65
Short-term borrowings:
Federal funds purchased		42,836		36		0.34			17,766		102		2.30
Securities sold under agreements to repurchase - customers		18,823		12		0.26			35,426		104		1.17
Long-term borrowings:
FHLBNY advances (4)		30,607		361		4.72			47,221		452		3.83
Obligations under capital lease		8,371		139		6.64			5,213		95		7.29
Junior subordinated debentures		92,786		1,081		4.66			92,786		1,359		5.86
Total borrowings		193,423		1,629		3.37			198,412		2,112		4.26
Total interest-bearing liabilities		2,663,226		11,426		1.72			2,600,310		18,017		2.77
Non-interest-bearing demand deposits		476,478							435,249
Other liabilities		87,893							25,310
Total non-interest bearing liabilities		564,371							460,559
Total liabilities		3,227,597							3,060,869
Shareholders' equity		365,440							361,895
Total liabilities and shareholders' equity	$	3,593,037						$	3,422,764

Net interest income			$	26,987						$	25,409
Interest rate spread (5)						3.06	%						2.83	%
Net interest margin (6)						3.36	%						3.28	%
Ratio of average interest-earning assets to average interest-bearing liabilities						120.80	%						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. The fully taxable equivalent adjustment for three months ended September 30, 2009 and 2008 was $521,000 and $447,000, respectively.
(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.

SUN BANCORP, INC. AND SUBSIDIARIES
AVERAGE BALANCE SHEETS (Unaudited)
(Dollars in thousands)
	For the Nine Months Ended September 30, 2009							For the Nine Months Ended September 30, 2008
	Average		Income/		Yield/			Average		Income/		Yield/
	Balance		Expense		Cost			Balance		Expense		Cost
Interest-earning assets:
Loans receivable (1),(2):
Commercial and industrial	$	2,237,732	$	77,774		4.63	%	$	2,094,470	$	93,089		5.93	%
Home equity		266,878		10,080		5.04			267,169		11,880		5.93
Second mortgage		76,851		3,715		6.45			82,615		4,037		6.52
Residential real estate		74,456		3,264		5.85			53,287		2,547		6.37
Other		75,051		3,654		6.49			85,633		4,551		7.09
Total loans receivable		2,730,968		98,487		4.81			2,583,174		116,104		5.99
Investment securities (3)		450,572		16,015		4.74			434,928		16,290		4.99
Interest-earning bank balances		50,799		81		0.21			9,811		184		2.50	��
Federal funds sold		125		-		-			15,760		234		1.98
Total interest-earning assets		3,232,464		114,583		4.73			3,043,673		132,812		5.82
Cash and due from banks		48,203							57,580
Bank properties and equipment, net		49,637							48,156
Goodwill and intangible assets, net		145,028							149,744
Other assets		140,904							73,481
Total non-interest-earning assets		383,772							328,961
Total assets	$	3,616,236						$	3,372,634

Interest-bearing liabilities:
Interest-bearing deposit accounts:
Interest-bearing demand deposits	$	1,038,932		7,969		1.02	%	$	828,107		10,547		1.70	%
Savings deposits		297,404		2,264		1.02			420,997		6,323		2.00
Time deposits		1,180,923		25,899		2.92			1,088,507		33,305		4.08
Total interest-bearing deposit accounts		2,517,259		36,132		1.91			2,337,611		50,175		2.86
Short-term borrowings:
Federal funds purchased		21,154		61		0.38			21,244		404		2.54
Securities sold under agreements to repurchase - customer		17,151		32		0.25			36,650		445		1.62
Long-term borrowings:
FHLBNY advances (4)		32,805		1,090		4.43			56,522		1,745		4.12
Obligations under capital lease		6,271		328		6.97			5,230		286		7.29
Junior subordinated debentures		92,786		3,400		4.89			92,899		4,257		6.11
Total borrowings		170,167		4,911		3.85			212,545		7,137		4.48
Total interest-bearing liabilities		2,687,426		41,043		2.04			2,550,156		57,312		3.00
Non-interest-bearing demand deposits		435,474							427,505
Other liabilities		100,069							29,613
Total non-interest-bearing liabilities		535,543							457,118
Total liabilities		3,222,969							3,007,274
Shareholders' equity		393,267							365,360
Total liabilities and shareholders' equity	$	3,616,236						$	3,372,634

Net interest income			$	73,540						$	75,500
Interest rate spread (5)						2.69	%						2.82	%
Net interest margin (6)						3.03	%						3.31	%
Ratio of average interest-earning assets to average interest-bearing liabilities						120.28	%						119.35	%

(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. The fully taxable equivalent adjustment for nine months ended September 30, 2009 and 2008 was $1.5 million and $1.3 million, respectively.
(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.

Sun Bancorp (SNBC) Inactive 8-KSun Bancorp, Inc. Reports Third Quarter 2009 Results