Sun Bancorp (SNBC) 8-K Sun Bancorp, Inc. Reports Fourth Quarter 2010 Results

News Release

Contact:  Robert B. Crowl, EVP, Chief Financial Officer, (856) 691-7700

Sun Bancorp, Inc. Reports Fourth Quarter 2010 Results

VINELAND, NJ – January 25, 2011 – Sun Bancorp, Inc. (NASDAQ: SNBC) reported today a net loss available to common shareholders of $28.1 million, or a loss of $0.67 per diluted share, for the fourth quarter ended December 31, 2010, compared to a net loss available to common shareholders of $6.3 million, or a loss of $0.27 per diluted share, for the fourth quarter ended December 31, 2009. As previously reported during the quarter, the Company completed multiple loan sales totaling $76.6 million of criticized and classified commercial real estate loans to strengthen the balance sheet.

The following are key items which affected the results for the fourth quarter of 2010 as compared to the fourth quarter of 2009:

●  Net loss of $25.1 million on the sale of commercial real estate loans.

●  Loan loss provision of $35.5 million as compared to $19.5 million for the comparable prior year period, inclusive of $21.3 million of the loss recorded on the aforementioned loan sales.

●  Loss of $2.7 million on fair value credit adjustments on customer derivatives.

●  The Company completed the conversion of 88,009 shares of the Company’s $1,000 par value Series B mandatorily convertible cumulative non-voting perpetual preferred stock into common stock at a conversion price of $4.00 per share.

Thomas X. Geisel, President and CEO of Sun Bancorp, remarked, “In the fourth quarter we continued to execute successfully on strategies to strengthen the balance sheet, our capital position and grow the specialty businesses.”

Geisel stated, “Despite the continued economic challenges in 2010, we focused on what we could control.  We increased average core deposits 12%, while reducing the cost of total deposits by 55 basis points; grew Sun Home Loans mortgage origination income 71% to a franchise best; achieved a 6.2% year-over-year revenue improvement in our investment business, Sun Financial Services, marking the second strongest year in its history; Cash Management posted a record year; and we met or exceeded fee income and loan production goals in our Asset Based Lending and Healthcare Finance specialty groups.”

In looking to 2011, Geisel remarked, “We have a strong business model which demonstrates our ability to be competitive, grow and capitalize on opportunities to expand customer relationships throughout the State, building on the work we have done in 2010.”  

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    For the year ended December 31, 2010, the Company reported a net loss available to common shareholders of $185.1 million, or a loss of $6.55 per diluted share, as compared to a net loss available to common shareholders of $22.5 million, or a loss of $0.97 per diluted share, for the comparable prior year period. The year ended December 31, 2010 included loan loss provision charges of $101.5 million, a goodwill impairment charge of $89.7 million, and the establishment of a $28.8 million deferred tax asset valuation allowance. The 2009 comparable period included charges of $60.8 million as a result of loan loss provisions, preferred shares issued and subsequently repurchased under the TARP, the FDIC special assessment, as well as other-than-temporary impairment (“OTTI”) charges.

Discussion of Results:

Balance Sheet

●  Total assets were $3.42 billion at December 31, 2010, as compared to $3.60 billion at September 30, 2010 and $3.58 billion at December 31, 2009.

●  Gross loans were $2.54 billion at December 31, 2010 as compared to $2.68 billion at September 30, 2010 and $2.72 billion at December 31, 2009. Compared to the linked quarter, commercial loans decreased by $132.2 million, of which $76.6 million related to the aforementioned loan sale. The balance of the commercial loan decline was due to continued charge-off activity and large pay downs on commercial real estate loans. The remaining decrease in gross loans was due to reduced loan demand and decreases in the home equity loan and residential real estate portfolios of $8.9 million and $6.5 million, respectively.

●  Total deposits at December 31, 2010 equaled $2.94 billion as compared to $3.05 billion at September 30, 2010 and $2.91 billion at December 31, 2009. The decline of $111.4 million or 3.7% over the linked quarter is primarily in Public Funds, which fell $59.0 million or 13.8%, and certificates of deposit greater than $100,000 which declined $57.1 million or 61.8%. These reductions are attributable to the seasonality related to municipal tax proceeds and the expected maturities in both the Public Funds and certificates of deposit greater than $100,000 portfolios. 

Net Interest Income and Margin

●  On a tax equivalent basis, net interest income, decreased $630,000 over the linked quarter to $27.7 million primarily due to a decrease in average loans receivable of $116.4 million, or 4.2%. The yield on loans increased two basis points over the linked quarter.  The net interest margin was 3.37% for the fourth quarter, as compared to the linked quarter of 3.47% and 3.64% for the comparable prior year quarter. 

●  The yield on earning assets decreased 18 basis points over the linked quarter from 4.53% to 4.35% for the three months ended December 31, 2010. This decrease was due to a decrease of 42 basis points on investment yields resulting from the sale of $158.8 million in available for sale securities and a decrease in average loans receivable of $116.4 million for the quarter ended December 31, 2010.

●  The cost of interest-bearing liabilities decreased 7 basis points over the linked quarter from 1.29% to 1.22%. The cost of interest-bearing deposits of 1.06% for the fourth quarter continued to trend downward in comparison to prior periods as it decreased 8 basis points from 1.14% for the linked quarter and 31 basis points from 1.37% for the comparable prior year quarter.  The interest rate spread was 3.13% for the fourth quarter 2010, as compared to 3.24% for the linked quarter and 3.41% for the comparable prior year quarter.

●  Non-accrual interest reversals of $736,000 were recorded in the December 31, 2010 quarter as compared to $1.2 million in the linked quarter.  Adjusted for non-accrual interest reversals during the period, the Company’s net interest margin was 3.46% for the fourth quarter 2010, as compared to an adjusted 3.61% for the linked quarter.

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Non-Interest Income

●  Non-interest income was $7.8 million for the quarter ended December 31, 2010, an increase of $10.1 million over the linked quarter and $2.3 million over the comparable prior year quarter. The increase over the linked quarter was primarily attributable to a decrease of $4.8 million in the fair value credit adjustments taken on the Company’s derivative portfolio. In addition, the Company recognized a $4.6 million gain on the sale of $158.8 million in available for sale securities in the current quarter.

●  The Company recognized a pre-tax OTTI charge during the fourth quarter of $379,000 related to a non-investment grade security. The Company had recognized a pre-tax OTTI charge of $351,000 on the same security during the comparable prior year quarter.

●  Gain on sale of residential mortgage loans increased by $403,000 over the linked quarter to $1.3 million in the current quarter due to higher mortgage loan production and sales. This gain was partially offset by a decrease in service charges on deposits of $154,000 from the linked quarter.

Non-Interest Expense

●  The Company incurred $27.6 million of non-interest expense in the fourth quarter of 2010, a decrease of $1.8 million, or 6.0%, over the linked quarter and an increase of $1.9 million, or 7.2%, over the comparable prior year quarter. Fourth quarter results included professional fees of $1.2 million, of which $668,000 related to the commercial real estate loan sales. Problem loan costs increased $967,000 over the linked quarter primarily due to $650,000 in real estate tax payments in the current quarter.

Asset Quality

●  Provision expense for the fourth quarter was $35.5 million, a decrease of $6.9 million, or 16.3%, over the linked quarter, and an increase of $16.0 million, or 82.3%, over the comparable prior year quarter. The allowance for loan losses was $81.7 million at December 31, 2010, or 3.22% of gross loans, as compared to the allowance for loan losses to gross loans of 2.78% at September 30, 2010 and 2.21% at December 31, 2009.  Net charge-offs during the fourth quarter were $28.4 million, or 1.08% of average loans, as compared to $41.6 million, or 1.52% of average loans for the linked quarter and $5.6 million, or 0.21% of average loans outstanding for the comparable prior year quarter. Fourth quarter provision expense remained elevated as a result of $21.7 million in charge-offs from the commercial real estate loan sales, as well as the continued migration of loans to higher risk categories.

●  Total non-performing assets were $178.0 million, or 7.01% of total loans and real estate owned, as compared to $208.9 million at September 30, 2010, or 7.77% of total loans and real estate owned and $105.4 million at December 31, 2009, or 3.86% of total loans and real estate owned. The decrease for the linked quarter was primarily attributable to the loan sale which included $67.9 million of non-performing loans, partially offset by the migration of five commercial relationships totaling $32.4 million into non-performing status. The allowance for loan losses to non-performing loans was 47.02% at December 31, 2010, as compared to 36.46% at September 30, 20 10 and 62.56% at December 31, 2009. As of December 31, 2010, $86.1 million of non-performing loans are designated as collateral dependent and have been charged-down to current appraised values less cost of liquidation.

Capital

●  Stockholders’ equity totaled $268.6 million at December 31, 2010 compared to $356.6 million at December 31, 2009.  During the fourth quarter, the Company completed the conversion of 88,009 shares of the Company’s $1,000 par value Series B mandatorily convertible cumulative non-voting perpetual preferred stock into common stock at a conversion price of $4.00 per share. The Company’s tangible equity to tangible assets was 6.52% at December 31, 2010, as compared to 7.13% at September 30, 2010 and 6.24% at December 31, 2009.  At December 31, 2010, the Company’s total risk-based capital ratio, Tier 1 capital ratio and the leve rage capital ratio were approximately 13.01%, 11.38%, and 8.94%, respectively.  At December 31, 2010, Sun National Bank’s total risk-based capital ratio, Tier 1 capital ratio and the leverage capital ratio were approximately 12.26%, 10.99%, and 8.58%, respectively. 

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 The Company will hold its regularly scheduled conference call on Wednesday, January 26, 2011, at 11:00 a.m. (ET).  Participants may listen to the live Web cast through the Sun Bancorp, Inc. 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. (Nasdaq: SNBC) is a $3.42 billion asset bank holding company headquartered in Vineland and Mt. Laurel, New Jersey. Its primary subsidiary is Sun National Bank, a full service Commercial Bank serving customers through more than 60 locations in New Jersey. Sun National Bank has been named one of Forbes Magazine's "Most Trustworthy Companies" for five years running.  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.

Non-GAAP Financial Measures

This release references adjusted net interest margin. Adjusted net interest margin is derived from GAAP net interest income adjusted by adding back interest income that would have been earned had the loans been on accrual status.  We believe the presentation of adjusted net interest margin provides additional transparency of underlying trends.  Adjusted net interest margin for the quarters ending December 31, 2010 and September 30, 2010 is calculated by adding $736,000 and $1.2 million, respectively, of non-accrual interest reversals, annualized, to net interest income of $27.7 million and $28.3 million, respectively, and dividing the balance by average interest-earning assets of $3.3 billion for both periods.  Tax-equivalent interest income is also a non-GAAP financial measure.

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SUN BANCORP, INC. AND SUBSIDIARIES
FINANCIAL HIGHLIGHTS (Unaudited)
(Dollars in thousands, except per share amounts)
	For the Three Months Ended							For the Year Ended
	December 31,							December 31,
		2010			2009			2010			2009
Profitability for the period:
Net interest income		$	27,273		$	28,068		$	110,962		$	100,157
Provision for loan losses			35,511			19,479			101,518			46,666
Non-interest income			7,797			5,541			15,512			17,070
Non-interest expense			27,590			25,733			200,693			104,067
Loss before income taxes			(28,031	)		(11,603	)		(175,737	)		(33,506	)
Net loss			(28,134	)		(6,340	)		(185,059	)		(17,131	)
Net loss available to common shareholders		$	(28,134	)	$	(6,340	)	$	(185,059	)	$	(22,482	)
Financial ratios:
Return on average assets(1)			(3.14)	%		(0.71)	%		(5.19)	%		(0.47)	%
Return on average equity(1)			(37.88)	%		(6.96)	%		(56.82)	%		(4.44)	%
Return on average tangible equity(1),(2)			(45.43)	%		(11.44)	%		(80.23)	%		(7.09)	%
Net interest margin(1)			3.37	%		3.64	%		3.50	%		3.18	%
Efficiency ratio			78.67	%		76.57	%		158.68	%		88.77	%
Efficiency ratio, excluding non-operating income and non-operating expense(3)			77.83	%		75.77	%		86.84	%		83.69	%
Loss per common share:
Basic		$	(0.67	)	$	(0.27	)	$	(6.55	)	$	(0.97	)
Diluted		$	(0.67	)	$	(0.27	)	$	(6.55	)	$	(0.97	)
Average equity to average assets			8.29	%		10.15	%		9.13	%		10.69	%

	December 31,
	2010			2009
At period-end:
Total assets	$	3,417,905		$	3,578,905
Total deposits		2,940,460			2,909,268
Loans receivable, net of allowance for loan losses		2,453,457			2,657,694
Investments		493,493			457,192
Borrowings		33,417			146,193
Junior subordinated debentures		92,786			92,786
Shareholders' equity		268,601			356,593
Credit quality and capital ratios:
Allowance for loan losses to gross loans		3.22	%		2.21	%
Non-performing assets to gross loans and real estate owned		7.01	%		3.86	%
Allowance for loan losses to non-performing loans		47.02	%		62.56	%
Total capital (to risk-weighted assets):
Sun Bancorp, Inc.		13.01	%		11.38	%
Sun National Bank		12.26	%		10.87	%
Tier 1 capital (to risk-weighted assets):
Sun Bancorp, Inc.		11.38	%		10.12	%
Sun National Bank		10.99	%		9.61	%
Leverage Ratio:
Sun Bancorp, Inc.		8.94	%		9.08	%
Sun National Bank		8.58	%		8.58	%
Book value per common share	$	5.33		$	15.29
Tangible book value per common share	$	4.36		$	9.19
(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 expense for the year ended December 31, 2010 excludes a goodwill impairment charge of $89.7 million. Non-interest income for the three months and year ended December 31, 2010 excludes a net impairment loss on available for sale securities of $379,000 and $1.3 million, respectively. Non-interest income for the three months and year ended December 31, 2009 exclude a net impairment loss on available for sale securities of $351,000 and $7.1 million, respectively.

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SUN BANCORP, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION (Unaudited)
(Dollars in thousands, except par value amounts)
	December 31, 2010			December 31, 2009
ASSETS
Cash and due from banks	$	36,522		$	53,857
Interest-earning bank balances		150,704			5,263
Cash and cash equivalents		187,226			59,120
Investment securities available for sale (amortized cost of $483,255 and $435,267 at December 31, 2010 and 2009, respectively)		472,864			434,738
Investment securities held to maturity (estimated fair value of $3,155 and $7,121 at December 31, 2010 and 2009, respectively)		3,039			6,955
Loans receivable (net of allowance for loan losses of $81,713 and $59,953 at December 31, 2010 and 2009, respectively)		2,453,457			2,657,694
Restricted equity investments		17,590			15,499
Bank properties and equipment, net		53,428			53,246
Real estate owned		4,272			9,527
Accrued interest receivable		10,004			12,235
Goodwill		38,188			127,894
Intangible assets, net		10,631			14,316
Deferred tax asset, net		4,245			20,721
Bank owned life insurance (BOLI)		74,656			77,753
Other assets		88,305			89,207
Total assets	$	3,417,905		$	3,578,905
LIABILITIES AND SHAREHOLDERS’ EQUITY
Liabilities:
Deposits	$	2,940,460	��	$	2,909,268
Federal funds purchased		-			89,000
Securities sold under agreements to repurchase – customers		6,307			18,677
Advances from the Federal Home Loan Bank of New York (FHLBNY)		3,999			15,215
Securities sold under agreements to repurchase – FHLBNY		15,000			15,000
Obligations under capital lease		8,111			8,301
Junior subordinated debentures		92,786			92,786
Other liabilities		82,641			74,065
Total liabilities		3,149,304			3,222,312
Shareholders’ equity:
Preferred stock, $1 par value, 1,000,000 shares authorized; none issued		-			-
Common stock, $1 par value, 100,000,000 shares authorized; 50,463,594 shares issued and 50,356,871 shares outstanding at December 31, 2010; 25,435,994 shares issued and 23,329,271 shares outstanding at December 31, 2009		52,464			25,436
Additional paid-in capital		438,335			362,189
Retained deficit		(189,656	)		(4,597	)
Accumulated other comprehensive loss		(6,146	)		(149	)
Deferred compensation plan trust		(234	)		(124	)
Treasury stock at cost, 2,106,723 shares at December 31, 2010 and 2009		(26,162	)		(26,162	)
Total shareholders’ equity		268,601			356,593
Total liabilities and shareholders’ equity	$	3,417,905		$	3,578,905

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SUN BANCORP, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS (Unaudited)
(Dollars in thousands, except share and per share amounts)
	For the Three Months Ended   December 31,							For the Year Ended  December 31,
	2010				2009			2010			2009
INTEREST INCOME
Interest and fees on loans	$		31,415		$	33,324		$	129,391		$	131,811
Interest on taxable investment securities			2,991			3,286			11,993			14,627
Interest on non-taxable investment securities			710			1,034			3,344			3,729
Dividends on restricted equity investments			238			223			875			832
Total interest income			35,354			37,867			145,603			150,999
INTEREST EXPENSE
Interest on deposits			6,657			8,225			28,780			44,357
Interest on funds borrowed			392			550			1,744			2,061
Interest on junior subordinated debentures			1,032			1,024			4,117			4,424
Total interest expense			8,081			9,799			34,641			50,842
Net interest income			27,273			28,068			110,962			100,157
PROVISION FOR LOAN LOSSES			35,511			19,479			101,518			46,666
Net interest (loss) income after provision for loan losses			(8,238	)		8,589			9,444			53,491
NON-INTEREST INCOME
Service charges on deposit accounts			2,715			3,150			11,572			12,440
Other service charges			94			85			364			331
Gain on sale of mortgage loans			1,324			603			3,560			2,352
Gain on derivative instruments			-			50			-			262
Investment products income			728			497			2,831			2,669
BOLI income			452			600			2,074			2.249
Net impairment losses recognized in earnings			(379	)		(351	)		(1,329	)		(7,115	)
Derivative credit valuation adjustment			(2,705	)		(78	)		(12,214	)		(53)
Other			5,568			985			8,654			3,935
Total non-interest income			7,797			5,541			15,512			17,070
NON-INTEREST EXPENSE
Salaries and employee benefits			12,920			12,440			55,219			51,773
Occupancy expense			3,043			2,911			12,508			11,517
Equipment expense			1,634			1,732			6,783			6,574
Data processing expense			1,133			1,021			4,359			4,063
Amortization of intangible assets			921			921			3,685			4,453
Goodwill impairment			-			-			89,706			-
Insurance expense			2,064			1,512			7,696			7,804
Professional fees			1,220			713			2,724			2,193
Advertising expense			390			786			2,335			2,453
Problem loan expense			1,923			628			5,162			1,958
Real estate owned expense, net			39			28			442			1,155
Other			2,303			3,041			10,074			10,124
Total non-interest expense			27,590			25,733			200,693			104,067
LOSS BEFORE INCOME TAXES			(28,031	)		(11,603	)		(175,737	)		(33,506	)
INCOME TAX EXPENSE (BENEFIT)			103			(5,263	)		9,322			(16,375	)
NET LOSS			(28,134	)		(6,340	)		(185,059	)		(17,131	)
Preferred stock dividends and discount accretion			-			-			-			5,351
NET LOSS AVAILABLE TO COMMON SHAREHOLDERS	$		(28,134	)	$	(6,340	)	$	(185,059	)	$	(22,482	)
Basic loss per share	$		(0.67	)	$	(0.27	)	$	(6.55	)	$	(0.97	)
Diluted loss per share	$		(0.67	)	$	(0.27	)	$	(6.55	)	$	(0.97	)
Weighted average shares – basic		42,119,553			23,223,463			28,258,953			23,134,424
Weighted average shares – diluted		42,119,553			22,223,463			28,258,953			23,134,424

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SUN BANCORP, INC. AND SUBSIDIARIES
HISTORICAL TRENDS IN QUARTERLY FINANCIAL DATA (Unaudited)
(Dollars in thousands)
	2010			2010			2010			2010			2009
	Q4			Q3			Q2			Q1			Q4
Balance sheet at quarter end:
Cash and cash equivalents	$	187,226		$	205,265		$	52,810		$	52,570		$	59,120
Investment securities		493,493			479,055			428,362			430,104			457,192
Loans:
Commercial and industrial		2,103,492			2,235,715			2,289,148			2,238,967			2,249,365
Home equity lines of credit		239,729			244,274			252,425			257,368			258,592
Home equity term loans		53,912			58,305			61,941			65,857			68,592
Residential real estate		79,074			85,554			79,034			71,452			75,322
Other		58,963			58,930			62,956			63,924			65,776
Total gross loans		2,535,170			2,682,778			2,745,504			2,697,568			2,717,647
Allowance for loan losses		(81,713	)		(74,579	)		(73,752	)		(63,292	)		(59,953	)
Net loans		2,453,457			2,608,199			2,671,752			2,634,276			2,657,694
Goodwill		38,188			38,188			38,188			127,894			127,894
Intangible assets, net		10,631			11,552			12,474			13,395			14,316
Total assets		3,417,905			3,603,637			3,512,310			3,531,998			3,578,905
Total deposits		2,940,460			3,051,894			2,961,816			2,924,815			2,909,268
Federal funds purchased		-			-			37,000			25,000			89,000
Securities sold under agreements to repurchase - customers		6,307			15,702			17,156			15,767			18,677
Advances from FHLBNY		3,999			4,308			4,613			14,916			15,215
Securities sold under agreements to repurchase - FHLBNY		15,000			15,000			15,000			15,000			15,000
Obligations under capital lease		8,111			8,169			8,217			8,260			8,301
Junior subordinated debentures		92,786			92,786			92,786			92,786			92,786
Total shareholders' equity		268,601			303,038			273,161			356,129			356,593
Quarterly average balance sheet:
Loans:
Commercial and industrial	$	2,184,212		$	2,292,274		$	2,262,656		$	2,241,443		$	2,238,579
Home equity lines of credit		241,510			250,033			256,697			258,359			260,382
Home equity term loans		57,310			60,729			64,051			67,435			69,844
Residential real estate		88,144			82,094			74,427			73,333			75,890
Other		57,522			59,998			62,249			63,804			66,698
Total gross loans		2,628,698			2,745,128			2,720,080			2,704,374			2,711,393
Securities and other interest-earning assets		658,013			518,262			450,947			459,309			433,706
Total interest-earning assets		3,286,711			3,263,390			3,171,027			3,163,683			3,145,099
Total assets		3,582,647			3,578,296			3,554,630			3,554,244			3,590,339
Non-interest-bearing demand deposits		509,093			505,036			471,033			440,860			480,080
Total deposits		3,032,594			3,043,268			2,957,970			2,919,477			2,886,322
Total interest-bearing liabilities		2,657,984			2,683,915			2,640,155			2,672,746			2,652,540
Total shareholders' equity		297,118			287,897			358,300			360,475			364,530
Capital and credit quality measures:
Total capital (to risk-weighted assets):
Sun Bancorp, Inc.		13.01	%		12.92	%		11.09	%		11.49	%		11.38	%
Sun National Bank		12.26	%		12.04	%		10.64	%		10.99	%		10.87	%
Tier 1 capital (to risk-weighted assets):
Sun Bancorp, Inc.		11.38	%		8.02	%		9.82	%		10.23	%		10.12	%
Sun National Bank		10.99	%		10.77	%		9.37	%		9.73	%		9.61	%
Leverage ratio:
Sun Bancorp, Inc.		8.94	%		6.67	%		8.60	%		9.21	%		9.08	%
Sun National Bank		8.58	%		8.91	%		8.22	%		8.80	%		8.58	%
Average equity to average assets		8.29	%		8.05	%		10.08	%		10.14	%		10.15	%
Allowance for loan losses to total gross loans		3.22	%		2.78	%		2.69	%		2.35	%		2.21	%
Non-performing assets to total gross loans and real estate owned		7.01	%		7.77	%		4.62	%		3.32	%		3.86	%
Allowance for loan losses to non-performing loans		47.02	%		36.46	%		59.87	%		73.53	%		62.56	%
Other data:
Net charge-offs	$	(28,377	)	$	(41,602	)	$	(3,518	)	$	(6,261	)	$	(5,593	)
Non-performing assets:
Non-accrual loans		159,426			192,769			120,685			78,403			87,882
Troubled debt restructurings, non-accrual		11,796			-			-			-			-
Loans past due 90 days and accruing		2,554			11,802			2,500			7,678			7,958
Real estate owned, net		4,272			4,272			3,828			3,688			9,527
��      Total non-performing assets		178,048			208,843			127,013			89,769			105,367
Troubled debt restructuring, performing	$	20,341		$	20,396		$	19,161		$	19,353		$	-

-10-

SUN BANCORP, INC. AND SUBSIDIARIES
HISTORICAL TRENDS IN QUARTERLY FINANCIAL DATA (Unaudited)
(Dollars in thousands, except share and per share amounts)
	2010			2010			2010			2010			2009
	Q4			Q3			Q2			Q1			Q4
Profitability for the quarter:
Tax-equivalent interest income	$	35,736		$	36,971		$	37,349		$	37,347		$	38,425
Interest expense		8,081			8,686			8,690			9,184			9,799
Tax-equivalent net interest income		27,655			28,285			28,659			28,163			28,626
Tax-equivalent adjustment		382			399			479			540			558
Provision for loan losses		35,511			42,429			13,978			9,600			19,479
Non-interest income (loss) excluding net impairment losses on available for sale securities		8,176			(1,402	)		4,416			5,651			5,892
Net impairment losses on available for sale securities		(379	)		(950	)		-			-			(351	)
Non-interest expense excluding amortization of intangible assets and goodwill impairment		26,669			28,419			27,060			25,155			24,812
Amortization of intangible assets and goodwill impairment		921			922			90,627			921			921
Loss before income taxes		(28,031	)		(46,236	)		(99,068	)		(2,402	)		(11,603	)
Income tax expense (benefit)		103			28,757			(17,898	)		(1,640	)		(5,263	)
Net loss		(28,134	)		(74,993	)		(81,170	)		(762	)		(6,340	)
Net loss available to common shareholders	$	(28,134	)	$	(75,267	)	$	(81,170	)	$	(762	)	$	(6,340	)
Financial ratios:
Return on average assets(1)		(3.14)	%		(8.38)	%		(9.13)	%		(0.09)	%		(0.71)	%
Return on average equity(1)		(37.88)	%		(104.19)	%		(90.62)	%		(0.85)	%		(6.96)	%
Return on average tangible equity(1),(2)		(45.43)	%		(126.27)	%		(148.70)	%		(1.39)	%		(11.44)	%
Net interest margin(1)		3.37	%		3.47	%		3.62	%		3.56	%		3.64	%
Efficiency ratio		78.67	%		114.91	%		361.04	%		78.37	%		76.57	%
Efficiency ratio, excluding non-operating income and non-operating expense		77.83	%		110.79	%		85.84	%		78.37	%		75.77	%
Per share data:
Loss per common share:
Basic	$	(0.67	)	$	(3.14	)	$	(3.46	)	$	(0.03	)	$	(0.27	)
Diluted	$	(0.67	)	$	(3.14	)	$	(3.46	)	$	(0.03	)	$	(0.27	)
Book value	$	5.33		$	7.62		$	11.63		$	15.22		$	15.29
Tangible book value	$	4.36		$	5.86		$	9.48		$	9.18		$	9.19
Average basic shares	42,119,553			23,960,691			23,431,305			23,365,406			23,223,463
Average diluted shares	42,119,553			23,960,691			23,431,305			23,365,406			23,223,463
Operating non-interest income:
Service charges on deposit accounts	$	2,715		$	2,869		$	3,044		$	2,944		$	3,150
Other service charges		94			92			99			79			85
Gain on sale of mortgage loans		1,324			921			712			603			603
Gain on derivative instruments		-			-			-			-			50
Investment products income		728			708			792			603			497
BOLI income		452			545			539			538			600
Derivative credit valuation adjustment		(2,705	)		(7,498	)		(1,980	)		(31	)		(78	)
Other		5,568			961			1,210			915			985
Total operating non-interest income (loss)		8,176			(1,402	)		4,416			5,651			5,892
Non-operating loss(3):
Net impairment losses on available for sale securities recognized in earnings		(379	)		(950	)		-			-			(351	)
Total non-operating losses		(379	)		(950	)		-			-			(351	)
Total non-interest income (loss)	$	7,797		$	(2,352	)	$	4,416		$	5,651		$	5,541
Operating non-interest expense:
Salaries and employee benefits	$	12,920		$	15,079		$	14,361		$	12,859		$	12,440
Occupancy expense		3,043			3,030			2,895			3,540			2,911
Equipment expense		1,634			1,663			1,750			1,736			1,732
Data processing expense		1,133			1,039			1,101			1,086			1,021
Amortization of intangible assets		921			922			921			921			921
Insurance expense		2,064			2,105			2,020			1,507			1,512
Professional fees		1,220			461			459			584			713
Advertising expense		390			833			532			580			786
Problem loan expense		1,923			956			1,461			823			628
Real estate owned expense, net		39			93			94			216			28
Other		2,303			3,160			2,386			2,224			3,041
Total operating non-interest expense		27,590			29,341			27,980			26,076			25,733
Non-operating expense:
Goodwill impairment		-			-			89,706			-			-
Total non-operating expense		-			-			89,706			-			-
Total non-interest expense	$	27,590		$	29,341		$	117,686		$	26,076		$	25,733
(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) Amount consists of items which the Company believes are not a result of normal operations.

-11-

SUN BANCORP, INC. AND SUBSIDIARIES
AVERAGE BALANCE SHEETS (Unaudited)
(Dollars in thousands)
	For the Three Months Ended December 31, 2010						For the Three Months Ended December 31, 2009
	Average		Income/		Yield/		Average		Income/		Yield/
	Balance		Expense		Cost		Balance		Expense		Cost
Interest-earning assets:
Loans receivable (1),(2):
Commercial and industrial	$	2,184,212	$	25,654	4.70	%	$	2,238,579	$	26,939	4.81	%
Home equity lines of credit		241,510		2,744	4.54			260,382		3,139	4.82
Home equity term loans		57,310		869	6.07			69,844		1,130	6.47
Residential real estate		88,144		1,179	5.35			75,890		971	5.12
Other		57,522		969	6.74			66,698		1,145	6.87
Total loans receivable		2,628,698		31,415	4.78			2,711,393		33,324	4.92
Investment securities (3)		491,588		4,216	3.43			425,637		5,099	4.79
Interest-earning deposits with banks		166,425		105	0.25			8,069		2	0.10
Total interest-earning assets		3,286,711		35,736	4.35			3,145,099		38,425	4.89
Non-interest-earning assets:
Cash and due from banks		47,492						97,729
Bank properties and equipment, net		53,018						53,147
Goodwill and intangible assets, net		49,402						142,778
Other assets		146,024						151,586
Total non-interest-earning assets		295,936						445,240
Total assets	$	3,582,647					$	3,590,339
Interest-bearing liabilities:
Interest-bearing deposit accounts:
Interest-bearing demand deposits	$	1,387,423		2,581	0.74	%	$	1,175,432		2,703	0.92	%
Savings deposits		281,401		510	0.72			299,055		673	0.90
Time deposits		854,677		3,566	1.67			931,755		4,849	2.08
Total interest-bearing deposit accounts		2,523,501		6,657	1.06			2,406,242		8,225	1.37
Short-term borrowings:
Federal funds purchased		-		-	-			94,366		53	0.22
Securities sold under agreements to repurchase - customers		14,457		8	0.22			20,508		10	0.20
Long-term borrowings:
FHLBNY advances (4)		19,102		246	5.15			30,316		349	4.60
Obligations under capital lease		8,138		138	6.78			8,322		138	6.63
Junior subordinated debentures		92,786		1,032	4.45			92,786		1,024	4.41
Total borrowings		134,483		1,424	4.24			246,298		1,574	2.56
Total interest-bearing liabilities		2,657,984		8,081	1.22			2,652,540		9,799	1.48
Non-interest-bearing liabilities:
Non-interest-bearing demand deposits		509,093						480,080
Other liabilities		118,452						93,188
Total non-interest-bearing liabilities		627,545						573,268
Total liabilities		3,285,529						3,225,808
Shareholders' equity		297,118						364,531
Total liabilities and shareholders' equity	$	3,582,647					$	3,590,339
Net interest income			$	27,655					$	28,626
Interest rate spread (5)					3.13	%					3.41	%
Net interest margin (6)					3.37	%					3.64	%
Ratio of average interest-earning assets to average interest-bearing liabilities					123.65	%					118.57	%
(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 December 31, 2010 and 2009 was $382,000 and $558,000, 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.

-12-

SUN BANCORP, INC. AND SUBSIDIARIES
AVERAGE BALANCE SHEETS (Unaudited)
(Dollars in thousands)
	For the Year Ended December 31, 2010							For the Year Ended December 31, 2009
	Average		Income/		Yield/			Average		Income/		Yield/
	Balance		Expense		Cost			Balance		Expense		Cost
Interest-earning assets:
Loans receivable (1),(2):
Commercial and industrial	$	2,245,118	$	105,210		4.69	%	$	2,237,940	$	104,713		4.68	%
Home equity lines of credit		251,599		11,714		4.66			265,240		13,219		4.98
Home equity term loans		62,349		3,889		6.24			75,084		4,845		6.45
Residential real estate		79,547		4,415		5.55			74,823		4,235		5.66
Other		60,874		4,163		6.84			72,946		4,799		6.58
Total loans receivable		2,699,487		129,391		4.79			2,726,033		131,811		4.84
Investment securities (3)		452,365		17,846		3.95			442,868		21,114		4.77
Interest-earning deposits with banks		69,803		166		0.24			40,029		83		0.21
Federal funds sold		-		-		-			94		-		-
Total interest-earning assets		3,221,655		147,403		4.58			3,209,024		153,008		4.77
Non-interest-earning assets:
Cash and due from banks		47,393							60,687
Bank properties and equipment, net		52,944							50,522
Goodwill and intangible assets, net		95,010							144,461
Other assets		150,558							145,015
Total non-interest-earning assets		345,905							400,685
Total assets	$	3,567,560						$	3,609,709
Interest-bearing liabilities:
Interest-bearing deposit accounts:
Interest-bearing demand deposits	$	1,312,871		10,692		0.81		$	1,073,337		10,672		0.99	%
Savings deposits		295,121		2,283		0.77			297,820		2,937		0.99
Time deposits		899,038		15,805		1.76			1,118,120		30,748		2.75
Total interest-bearing deposit accounts		2,507,030		28,780		1.15			2,489,277		44,357		1.78
Short-term borrowings:
Federal funds purchased		16,907		89		0.53			39,607		114		0.29
Securities sold under agreements to repurchase - customers		16,069		29		0.18			17,997		42		0.23
Long-term borrowings:
FHLBNY advances (4)		22,710		1,076		4.74			32,178		1,439		4.47
Obligations under capital lease		8,212		550		6.70			6,788		466		6.87
Junior subordinated debentures		92,786		4,117		4.44			92,786		4,424		4.77
Total borrowings		156,684		5,861		3.74			189,356		6,485		3.42
Total interest-bearing liabilities		2,663,714		34,641		1.30			2,678,633		50,842		1.90
Non-interest-bearing liabilities:
Non-interest-bearing demand deposits		481,757							446,713
Other liabilities		96,420							98,339
Total non-interest-bearing liabilities		578,177							545,052
Total liabilities		3,241,891							3,223,685
Shareholders' equity		325,669							386,024
Total liabilities and shareholders' equity	$	3,567,560						$	3,609,709
Net interest income			$	112,762						$	102,166
Interest rate spread (5)						3.28	%						2.87	%
Net interest margin (6)						3.50	%						3.18	%
Ratio of average interest-earning assets to average interest-bearing liabilities						120.95	%						119.80	%
(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 the year ended December 31, 2010 and 2009 was $1.8 million and $2.0 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.

-13-

SUN BANCORP, INC. AND SUBSIDIARIES
AVERAGE BALANCE SHEETS (Unaudited)
(Dollars in thousands)
	For the Three Months Ended December 31, 2010							For the Three Months Ended September 30, 2010
	Average		Income/		Yield/			Average		Income/		Yield/
	Balance		Expense		Cost			Balance		Expense		Cost
Interest-earning assets:
Loans receivable (1),(2):
Commercial and industrial	$	2,184,212	$	25,654		4.70	%	$	2,292,274	$	26,620		4.65	%
Home equity lines of credit		241,510		2,744		4.54			250,033		2,921		4.67
Home equity term loans		57,310		869		6.07			60,729		932		6.14
Residential real estate		88,144		1,179		5.35			82,094		1,160		5.65
Other		57,522		969		6.74			59,998		1,031		6.87
Total loans receivable		2,628,698		31,415		4.78			2,745,128		32,664		4.76
Investment securities (3)		491,588		4,216		3.43			443,203		4,261		3.85
Interest-earning deposits with banks		166,425		105		0.25			75,059		46		0.25
Total interest-earning assets		3,286,711		35,736		4.35			3,263,390		36,971		4.53
Non-interest-earning assets:
Cash and due from banks		47,492							51,660
Bank properties and equipment, net		53,018							52,962
Goodwill and intangible assets, net		49,402							50,324
Other assets		146,024							159,960
Total non-interest-earning assets		295,936							314,906
Total assets	$	3,582,647						$	3,578,296
Interest-bearing liabilities:
Interest-bearing deposit accounts:
Interest-bearing demand deposits	$	1,387,423		2,581		0.74	%	$	1,325,084		2,706		0.82	%
Savings deposits		281,401		510		0.72			293,744		550		0.75
Time deposits		854,677		3,566		1.67			919,404		4,004		1.74
Total interest-bearing deposit accounts		2,523,501		6,657		1.06			2,538,232		7,260		1.14
Short-term borrowings:
Federal funds purchased		-		-		-			6,288		5		0.32
Securities sold under agreements to repurchase - customers		14,457		8		0.22			19,003		9		0.19
Long-term borrowings:
FHLBNY advances (4)		19,102		246		5.15			19,412		222		4.57
Obligations under capital lease		8,138		138		6.78			8,194		136		6.64
Junior subordinated debentures		92,786		1,032		4.45			92,786		1,054		4.54
Total borrowings		134,483		1,424		4.24			145,683		1,426		3.92
Total interest-bearing liabilities		2,657,984		8,081		1.22			2,683,915		8,686		1.29
Non-interest-bearing liabilities:
Non-interest-bearing demand deposits		509,093							505,036
Other liabilities		118,452							101,448
Total non-interest-bearing liabilities		627,545							606,484
Total liabilities		3,285,529							3,290,399
Shareholders' equity		297,118							287,897
Total liabilities and shareholders' equity	$	3,582,647						$	3,578,296
Net interest income			$	27,655						$	28,285
Interest rate spread (5)						3.13	%						3.24	%
Net interest margin (6)						3.37	%						3.47	%
Ratio of average interest-earning assets to average interest-bearing liabilities						123.65	%						121.59	%
(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 December 31, 2010 and September 30, 2010 was $382,000 and $399,000, 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.

-14-