Sun Bancorp (SNBC) 8-K Sun Bancorp, Inc. Reports Fourth Quarter 2011 Results

News Release

For Immediate Release

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

Sun Bancorp, Inc. Reports Fourth Quarter 2011 Results

VINELAND, NJ – January 30, 2012 – Sun Bancorp, Inc. (NASDAQ: SNBC) reported today a net loss available to common shareholders of $1.5 million, or a loss of $0.02 per diluted share, for the fourth quarter ended December 31, 2011, compared to a net loss available to common shareholders of $28.2 million, or a loss of $0.67 per diluted share, for the fourth quarter ended December 31, 2010 which included a $25.1 million net loss on the sale of commercial real estate loans, and net income available to common shareholders of $2.7 million, or earnings of $0.03 per diluted share, for the third quarter ended September 30, 2011.

The following are key items and events that occurred during the fourth quarter:

●  Non-performing loans decreased $27.5 million to $107.7 million at December 31, 2011 as compared to $135.9 million at September 30, 2011. Non-performing assets declined by $28.1 million from the linked quarter to $112.7 million at December 31, 2011.

●   Net charge-offs equaled $20.4 million, of which $17.0 million were related to the charge-off of previously established specific reserves. Provision expense totaled $6.8 million and the allowance for loan losses equaled $41.7 million, a decrease of $13.6 million from the prior quarter.

●  Average loans for the fourth quarter totaled $2.34 billion, up $19.3 million or 0.8%, compared to the prior quarter. Average deposits were down $9.8 million versus the prior quarter. The net interest margin equaled 3.54% versus 3.61% in the prior quarter.

●  Non-interest income increased $1.0 million to $6.8 million primarily due to a bank-owned life insurance distribution of $765 thousand and gains of $280 thousand on the sale of investment securities.

●  Tangible equity to assets equaled 8.41% as compared to 8.21% in the third quarter. Total Risk-based Capital equaled 15.22%.

“2011 was a year of commitment to our customers and the revitalization of our company.  We rolled up our sleeves and achieved the goals we set out to: we added talent, strengthened the balance sheet, improved operating performance and grew commercial loan production year-over-year by 36%,” said Thomas X. Geisel, Sun's President and Chief Executive Officer.   “We ended the year with strong capital and reserves and are well positioned to continue our positive asset quality and operating trends.  We look forward to executing our corporate strategy in 2012 to serve our customers, create earnings and grow from the platform we established.”

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For the full year ended December 31, 2011, the Company reported a net loss of $67.5 million, or $0.88 per diluted share, as compared to a net loss of $185.4 million, or $6.56 per diluted share, in 2010. Provision for loan losses totaled $74.3 million in 2011 versus $101.5 million in 2010. Non-interest expense equaled $110.2 million in 2011 versus $201.1 million in the prior year. Non-interest expense in 2010 included a goodwill impairment charge of $89.7 million. Total assets at December 31, 2011 equaled $3.18 billion as compared to $3.42 billion at December 31, 2010.

Discussion of Results:

Balance Sheet

● Total assets were $3.18 billion at December 31, 2011, as compared to $3.24 billion at September 30, 2011 and $3.42 billion at December 31, 2010.

● Gross loans held-for-investment were $2.29 billion at December 31, 2011, as compared to $2.31 billion at September 30, 2011 and $2.52 billion at December 31, 2010. Compared to the linked quarter, loans held-for-investment decreased by $15.3 million as the Company recorded net charge-offs of $20.4 million in the fourth quarter.

● Loans held-for-sale increased $2.3 million from the linked quarter to $23.2 million at December 31, 2011.

● Shareholders’ equity increased $1.0 million to $309.1 million at December 31, 2011 as compared to the linked quarter.

Net Interest Income and Margin

● On a tax equivalent basis, net interest income decreased $473 thousand over the linked quarter to $26.0 million. The average cost of interest-bearing liabilities decreased three basis points to 0.89%. The average yield on interest-earning assets decreased 10 basis points over the linked quarter from 4.33% to 4.23%. The net interest margin declined seven basis points to 3.54% from 3.61% for the linked quarter.  The margin increased 17 basis points from 3.37% for the comparable prior year quarter.

Non-Interest Income

● Non-interest income was $6.8 million for the quarter ended December 31, 2011, an increase of $1.0 million over the linked quarter of $5.8 million and $993 thousand million below the comparable prior year quarter income of $7.8 million. The increase over the linked quarter was primarily attributable to a bank-owned life insurance distribution of $765 thousand and gains on the sale of investment securities of $280 thousand.

Non-Interest Expense

● The Company incurred $27.2 million of non-interest expense in the fourth quarter of 2011, an increase of $253 thousand over the linked quarter and a decrease of $723 thousand from the comparable prior year quarter. Higher problem loan and occupancy expenses were partially offset by lower personnel and legal expenses.

Asset Quality

● The provision for loan losses for the fourth quarter was $6.8 million, as compared to $2.3 million in the linked quarter and $35.5 million in the comparable prior year quarter. The allowance for loan losses was $41.7 million at December 31, 2011, or 1.82% of gross loans held-for-investment, as compared to the allowance for loan losses to gross loans held-for-investment of 2.39% at September 30, 2011 and 3.24% at December 31, 2010.  Net charge-offs recorded in the current quarter were $20.4 million, or 0.87% of average loans, as compared to $5.8 million, or 0.25% of average loans for the linked quarter and $28.4 million, or 1.05% of average loans outstanding for the comparable prior year quarter. The prior year quarter included charge-offs of $21.7 million related to the sale of commercial real estate loans.

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● Total non-performing assets were $112.7 million, or 4.86% of total gross loans held-for-investment, loans held-for-sale and real estate owned at December 31, 2011, as compared to $140.8 million, or 6.04% and $177.7 million, or 7.00%, respectively, at September 30, 2011 and December 31, 2010. Non-performing loans decreased $27.5 million over the linked quarter to $107.7 million at December 31, 2011 from $135.2 million at September 30, 2011.

Capital

● Stockholders’ equity totaled $309.1 million at December 31, 2011 compared to $308.1 million at September 30, 2011. The Company’s tangible equity to tangible assets ratio was 8.41% at December 31, 2011, as compared to 8.21% at September 30, 2011 and 6.51% at December 31, 2010.  At December 31, 2011, the Company’s total risk-based capital ratio, Tier 1 capital ratio and leverage capital ratio were approximately 15.22%, 13.96%, and 11.09%, respectively.  At December 31, 2011, Sun National Bank’s total risk-based capital ratio, Tier 1 capital ratio and leverage capital ratio were approximately 13.39%, 12.13%, and 9.64%, respectively. 

The Company will hold its regularly scheduled conference call on Tuesday, January 31, 2012, 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 $3.18 billion asset bank holding company headquartered in Vineland, New Jersey, with its executive offices located in Mt. Laurel, New Jersey. Its primary subsidiary is Sun National Bank, a full service Commercial Bank serving customers through 65 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 tax-equivalent interest income and non-operating income and expenses. Tax-equivalent interest income is a non-GAAP financial measure. Tax-equivalent interest income assumes a 35% marginal federal tax rate for all periods. The fully taxable equivalent adjustments for the three months ended December 31, 2011 and 2010 were $271 thousand and $382 thousand, respectively. The fully taxable equivalent adjustments for the twelve months ended December 31, 2011 and 2010 were $1.3 million and $1.8 million, respectively. The fully taxable equivalent adjustment for the three months ended September 30, 2011 was $292 thousand. Non-operating income (loss) is also a non-GAAP financial measure. Non-operating income (loss) includes impairment losses recognized on available for sale securities included in earnings. Non-operating loss for the three months ended March 31, 2011 and December 31, 2010 was $250 thousand and $379 thousand, respectively. There were no non-operating income items during the three months ended December 31, 2011, September 30, 2011 or June 30, 2011.

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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 Twelve Months Ended
	December 31,										December 31,
		2011				2010					2011				2010
Profitability for the period:
Net interest income		$	25,729			$		27,273			$		103,528		$	110,962
Provision for loan losses			6,826					35,511					74,266			101,518
Non-interest income (loss)			6,804					7,797					13,468			15,512
Non-interest expense			27,226					27,949					110,225			201,052
Loss before income taxes			(1,519	)				(28,390)					(67,495	)		(176,096	)
Net loss			(1,519	)				(28,493)					(67,505			(185,418
Net loss available to common shareholders		$	(1,519	)		$		(28,219)			$		(67,505	)	$	(185,418	)
Financial ratios:
Return on average assets(1)			(0.19)	%				(3.14)		%			(2.05)	%		(5.19)	%
Return on average equity(1)			(1.96)	%				(37.88)		%			(22.57)	%		(56.82)	%
Return on average tangible equity(1),(2)			(2.29)	%				(45.43)		%			(26.77)	%		(80.23)	%
Net interest margin(1)			3.54	%				3.37		%			3.50	%		3.50	%
Efficiency ratio			83.69	%				78.67		%			94.21	%		158.68	%
Efficiency ratio, excluding non-operating income and non-operating expense(3)			83.69	%				77.83		%			94.01	%		86.84	%
Loss per common share:
Basic		$	(0.02)			$		(0.67		)	$		(0.88	)	$	(6.56	)
Diluted		$	(0.02)			$		(0.67		)	$		(0.88	)	$	(6.56	)
Average equity to average assets			9.62	%				8.29		%			9.10	%		9.13	%
		December 31,
		2011			2010
At period-end:
Total assets		$	3,183,916				$		3,417,546
Total deposits			2,667,977						2,940,460
Loans receivable, net of allowance for loan losses			2,249,455						2,439,633
Loans held-for-sale			23,192						13,824
Investments			532,715						493,493
Borrowings			31,269						33,417
Junior subordinated debentures			92,786						92,786
Shareholders’ equity			309,083						268,242
Credit quality and capital ratios:
Allowance for loan losses to gross loans held-for-investment			1.82		%				3.24			%
Non-performing assets to gross loans held-for-investment, loans held-for-sale and real estate owned			4.86		%				7.00			%
Allowance for loan losses to non-performing loans held-for-investment			38.69		%				47.02			%
Total capital (to risk-weighted assets):
Sun Bancorp, Inc.			15.22		%				12.68			%
Sun National Bank			13.39		%				12.25			%
Tier 1 capital (to risk-weighted assets):
Sun Bancorp, Inc.			13.96		%				11.41			%
Sun National Bank			12.13		%				10.98			%
Leverage ratio:
Sun Bancorp, Inc.			11.09		%				8.93			%
Sun National Bank			9.64		%				8.57			%
Book value per common share		$	3.61				$		5.33
Tangible book value per common share		$	3.08				$		4.36
(1) Amounts for the three and twelve 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 twelve months ended December 31, 2011 excludes net impairment losses on available for sale securities of $250 thousand. Non-interest income for the three and twelve months ended December 31, 2010 exclude a net impairment loss on available for sale securities of $379 thousand and $1.3 million, respectively. Non-interest expense for the twelve months ended December 31, 2010 excludes a goodwill impairment charge of $89.7 million.

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SUN BANCORP, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION (Unaudited)
(Dollars in thousands, except par value amounts)
	December 31, 2011			December 31, 2010
ASSETS
Cash and due from banks	$	68,773		$	36,522
Interest-earning bank balances		51,049			150,704
Cash and cash equivalents		119,822			187,226
Investment securities available for sale (amortized cost of $514,488 and $483,255 at December 31, 2011 and December 31, 2010, respectively)		515,545			472,864
Investment securities held to maturity (estimated fair value of $1,413 and $3,155 at December 31, 2011 and December 31, 2010, respectively)		1,344			3,039
Loans receivable (net of allowance for loan losses of $41,667 and $81,713 at December 31, 2011 and December 31, 2010, respectively)		2,249,455			2,439,633
Loans held-for-sale		23,192			13,824
Restricted equity investments		15,826			17,590
Bank properties and equipment, net		54,756			53,428
Real estate owned		5,020			3,913
Accrued interest receivable		8,912			10,004
Goodwill		38,188			38,188
Intangible assets		6,947			10,631
Deferred taxes, net		-			4,245
Bank owned life insurance (BOLI)		74,871			74,656
Other assets		70,038			88,305
Total assets	$	3,183,916		$	3,417,546
LIABILITIES AND SHAREHOLDERS’ EQUITY
Liabilities:
Deposits	$	2,667,977		$	2,940,460
Securities sold under agreements to repurchase – customers		5,668			6,307
Advances from the Federal Home Loan Bank of New York (FHLBNY)		2,733			3,999
Securities sold under agreements to repurchase – FHLBNY		15,000			15,000
Obligations under capital lease		7,868			8,111
Junior subordinated debentures		92,786			92,786
Deferred taxes, net		432			-
Other liabilities		82,369			82,641
Total liabilities		2,874,833			3,149,304
Shareholders’ equity:
Preferred stock, $1 par value, 1,000,000 shares authorized; none issued		-			-
Common stock, $1 par value, 200,000,000 shares authorized; 87,818,503 shares issued and 85,711,780 shares outstanding at December 31, 2011; 52,463,594 shares issued and 50,356,871 shares outstanding at December 31, 2010		87,825			52,464
Additional paid-in capital		504,508			438,335
Retained deficit		(257,520	)		(190,015	)
Accumulated other comprehensive income (loss)		625			(6,146	)
Deferred compensation plan trust		(193	)		(234	)
Treasury stock at cost, 2,106,723 shares at December 31, 2011 and December 31, 2010		(26,162	)		(26,162	)
Total shareholders’ equity		309,083			268,242
Total liabilities and shareholders’ equity	$	3,183,916		$	3,417,546

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SUN BANCORP, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS (Unaudited)
(Dollars in thousands, except per share amounts)
		For the Three Months Ended December 31,						For the Twelve Months Ended December 31,
		2011			2010			2011			2010
INTEREST INCOME
Interest and fees on loans	$	27,678		$	31,415		$	112,793		$	129,391
Interest on taxable investment securities		2,421			2,991			10,507			11,993
Interest on non-taxable investment securities		503			710			2,487			3,344
Dividends on restricted equity investments		214			238			893			875
Total interest income		30,816			35,354			126,680			145,603
INTEREST EXPENSE
Interest on deposits		4,041			6,657			18,737			28,780
Interest on funds borrowed		351			392			1,418			1,744
Interest on junior subordinated debentures		695			1,032			2,997			4,117
Total interest expense		5,087			8,081			23,152			34,641
Net interest income		25,729			27,273			103,528			110,962
PROVISION FOR LOAN LOSSES		6,826			35,511			74,266			101,518
Net Interest income (loss) after provision for loan losses		18,903			(8,238	)		29,262			9,444
NON-INTEREST INCOME
Service charges on deposit accounts		2,799			2,715			10,889			11,572
Other service charges		71			94			330			364
Gain on sale of loans		906			1,324			3,247			3,560
Impairment losses on available for sale securities		-			(379	)		(250)			(1,329)
Gain on sale of AFS Securities		280			4,607			1,688			4,751
Investment products income		453			726			2,913			2,831
BOLI income		1,309			452			2,964			2,074
Derivative credit valuation adjustment		(214	)		(2,705	)		(12,538)			(12,214)
Other		1,200			963			4,225			3,903
Total non-interest income (loss)		6,804			7,797			13,468			15,512
NON-INTEREST EXPENSE
Salaries and employee benefits		13,011			12,920			52,501			55,219
Occupancy expense		3,643			3,043			13,373			12,508
Equipment expense		1,858			1,634			7,342			6,783
Amortization of intangible assets		921			921			3,685			3,685
Goodwill impairment		-			-			-			89,706
Data processing expense		1,118			1,133			4,352			4,359
Professional fees		412			1,220			3,271			2,724
Insurance expense		1,433			2,064			6,186			7,696
Advertising expense		664			390			2,946			2,335
Problem loan costs		1,866			1,923			8,342			5,162
Real estate owned expense, net		108			398			1,186			801
Office supplies expense		323			338			1,307			1,501
Other expense		1,869			1,965			5,734			8,573
Total non-interest expense		27,226			27,949			110,225			201,052
LOSS BEFORE INCOME TAXES		(1,519	)		(28,390	)		(67,495	)		(176,096	)
INCOME TAX EXPENSE		-			103			10			9,322
NET LOSS		(1,519	)		(28,493	)		(67,505	)		(185,418	)
Preferred stock dividends and discount accretion		-			(274	)		-			-
NET LOSS AVAILABLE TO COMMON        SHAREHOLDERS	$	(1,519	)	$	(28,219	)	$	(67,505	)	$	(185,418	)
Basic loss per share	$	(0.02	)	$	(0.67	)	$	(0.88	)	$	(6.56	)
Diluted loss per share	$	(0.02	)	$	(0.67	)	$	(0.88	)	$	(6.56	)
Weighted average shares – basic	85,587,878			42,119,553			76,653,990			28,258,953
Weighted average shares - diluted	85,587,878			42,119,553			76,653,990			28,258,953

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SUN BANCORP, INC. AND SUBSIDIARIES
HISTORICAL TRENDS IN QUARTERLY FINANCIAL DATA (Unaudited)
(Dollars in thousands)
		2011		2011			2011			2011			2010
		Q4		Q3			Q2			Q1			Q4
Balance sheet at quarter end:
Cash and cash equivalents	$	119,822		$	134,209		$	192,645		$	266,504		$	187,226
Investment securities		532,715			557,380			478,814			470,546			493,493
Loans held-for-investment:
Commercial and industrial		1,878,026			1,899,231			1,905,628			1,862,903			2,103,492
Home equity		224,517			230,098			234,688			232,318			239,729
Second mortgage		41,470			45,030			47,920			50,388			53,912
Residential real estate		100,438			82,967			75,546			69,311			65,250
Other		46,671			49,077			52,825			55,402			58,963
Total gross loans held-for-investment		2,291,122			2,306,403			2,316,607			2,270,322			2,521,346
Allowance for loan losses		(41,667)			(55,227	)		(58,328	)		(58,498	)		(81,713	)
Net loans held-for-investment		2,249,455			2,251,176			2,258,279			2,211,824			2,439,633
Loans held-for-sale		23,192			20,868			20,514			115,473			13,824
Goodwill		38,188			38,188			38,188			38,188			38,188
Intangible assets		6,947			7,868			8,789			9,710			10,631
Total assets		3,183,916			3,236,219			3,213,790			3,333,808			3,417,546
Total deposits		2,667,977			2,727,650			2,723,676			2,847,467			2,940,460
Securities sold under agreements to repurchase - customers		5,668			6,026			6,743			6,591			6,307
Advances from FHLBNY		2,733			3,054			3,372			3,687			3,999
Securities sold under agreements to repurchase - FHLBNY		15,000			15,000			15,000			15,000			15,000
Obligations under capital lease		7,868			7,930			7,991			8,051			8,111
Junior subordinated debentures		92,786			92,786			92,786			92,786			92,786
Total shareholders' equity		309,083			308,055			298,819			286,739			268,242
Quarterly average balance sheet:
Loans(1):
Commercial and industrial	$	1,910,635		$	1,901,394		$	1,936,621		$	2,072,519		$	2,184,212
Home equity		226,345			232,458			234,451			235,962			241,510
Second mortgage		44,600			47,844			50,257			53,402			57,310
Residential real estate		111,514			89,010			76,816			73,662			88,144
Other		46,248			49,361			52,831			55,847			57,522
Total gross loans		2,339,342			2,320,067			2,350,976			2,491,392			2,628,698
Securities and other interest-earning assets		602,485			616,679			643,808			639,092			658,013
Total interest-earning assets		2,941,827			2,936,746			2,994,784			3,130,484			3,286,711
Total assets		3,229,699			3,234,551			3,287,485			3,394,139			3,582,647
Non-interest-bearing demand deposits		536,558			528,505			491,235			481,605			509,093
Total deposits		2,706,772			2,716,542			2,774,767			2,904,448			3,032,594
Total interest-bearing liabilities		2,294,786			2,313,896			2,409,629			2,549,566			2,657,984
Total shareholders' equity		310,786			308,025			299,427			277,808			297,118
Capital and credit quality measures:
Total capital (to risk-weighted assets):
Sun Bancorp, Inc.		15.22	%		14.85	%		14.51	%		13.73	%		12.68	%
Sun National Bank		13.39	%		13.07	%		12.97	%		12.65	%		12.25	%
Tier 1 capital (to risk-weighted assets):
Sun Bancorp, Inc.		13.96	%		13.59	%		13.14	%		12.11	%		11.41	%
Sun National Bank		12.13	%		11.81	%		11.71	%		11.38	%		10.98	%
Leverage ratio:
Sun Bancorp, Inc.		11.09	%		11.08	%		10.47	%		9.62	%		8.93	%
Sun National Bank		9.64	%		9.64	%		9.35	%		9.05	%		8.57	%
Average equity to average assets		9.62	%		9.52	%		9.11	%		8.18	%		8.29	%
Allowance for loan losses to total gross loans held-for-investment		1.82	%		2.39	%		2.52	%		2.58	%		3.24	%
Non-performing assets to gross loans held-for-investment, loans held-for-sale and real estate owned		4.86	%		6.04	%		6.13	%		8.04	%		7.00	%
Allowance for loan losses to non-performing loans held-for-investment		38.69	%		42.23	%		45.25	%		50.41	%		47.02	%
Other data:
Net charge-offs		(20,386)			(5,809	)		(5,006	)		(83,498	)		(28,377	)
Non-performing assets:
Non-accrual loans	$	89,656		$	107,665		$	113,806		$	113,959		$	159,426
Non-accrual loans held-for-sale		-			5,186			11,296			71,771			-
Troubled debt restructurings,                   non-accrual		17,875			22,353			15,090			831			11,796
Loans past due 90 days and                    accruing		154			744			-			1,263			2,554
Real estate owned, net		5,020			4,893			3,306			4,439			3,913
Total non-performing assets		112,705			140,841			143,498			192,263			177,689
Troubled debt restructuring, performing		-			-			-			20,276			20,341
(1) Average balances include non-accrual loans and loans held-for-sale

-9-

SUN BANCORP, INC. AND SUBSIDIARIES
HISTORICAL TRENDS IN QUARTERLY FINANCIAL DATA (Unaudited)
(Dollars in thousands, except share and per share amounts)
	2011			2011			2011			2011			2010
	Q4			Q3			Q2			Q1			Q4
Profitability for the quarter:
Tax-equivalent interest income	$	31,087		$	31,802		$	32,673		$	32,458		$	35,736
Interest expense		5,087			5,329			5,813			6,923			8,081
Tax-equivalent net interest income		26,000			26,473			26,860			25,535			27,655
Tax-equivalent adjustment		271			292			368			409			382
Provision for loan losses		6,826			2,321			4,836			60,283			35,511
Non-interest income (loss) excluding net impairment losses on available for sale securities		6,804			5,770			4,993			(3,849	)		8,176
Net impairment losses on available for sale securities		-			-			-			(250	)		(379
Non-interest expense excluding amortization of intangible assets		26,305			26,051			27,323			26,861			27,028
Amortization of intangible assets		921			922			921			921			921
(Loss) income before income taxes		(1,519	)		2,657			(1,595	)		(67,038	)		(28,390
Income tax (benefit) expense		-			(23	)		4			29			103
Net (loss) income		(1,519	)		2,680			(1,599	)		(67,067	)		(28,493
Net (loss) income available to common shareholders	$	(1,519	)	$	2,680		$	(1,599	)	$	(67,067	)	$	(28,219
Financial ratios:
Return on average assets (1)		(0.19)	%		0.33	%		(0.19)	%		(7.90)	%		(3.18)
Return on average equity (1)		(1.96)	%		3.48	%		(2.14)	%		(96.57)	%		(38.36)
Return on average tangible equity (1),(2)		(2.29)	%		4.10	%		(2.54)	%		(116.91)	%		(46.01)
Net interest margin (1)		3.54	%		3.61	%		3.59	%		3.26	%		3.37
Efficiency ratio		83.69	%		84.42	%		89.71	%		132.13	%		79.69
Efficiency ratio, excluding non-operating income and non-operating expense		83.69	%		84.42	%		89.71	%		130.57	%		78.84
Per share data:
Income (loss) per common share:
Basic	$	(0.02	)	$	0.03		$	(0.02	)	$	(1.25	)	$	(0.67
Diluted	$	(0.02	)	$	0.03		$	(0.02	)	$	(1.25	)	$	(0.67
Book value	$	3.61		$	3.60		$	3.60		$	3.62		$	5.33
Tangible book value	$	3.08		$	3.06		$	3.03		$	3.02		$	4.36
Average basic shares	85,587,878			84,429,644			82,585,859			53,575,346			42,119,553
Average diluted shares	85,587,878			84,538,449			82,585,859			53,575,346			42,119,553
Operating non-interest income (loss):
Service charges on deposit accounts	$	2,799			2,838		$	2,702		$	2,550		$	2,715
Other service charges		71			85			88			86			94
Gain on sale of loans		906			708			708			925			1,324
Net gain (loss) on sale of available for sale securities		280			-			2,421			(1,013	)		4,606
Investment products income		453			562			1,010			888			728
BOLI income		1,309			549			560			546			452
Derivative credit valuation adjustment		(214	)		(309	)		(3,624	)		(8,391	)		(2,705
Other income		1,200			1,337			1,128			560			962
Total operating non-interest income (loss)		6,804			5,770			4,993			(3,849	)		8,176
Non-operating loss(3):
Net impairment losses on available for sale securities recognized in earnings		-			-			-			(250	)		(379
Total non-operating loss					-			-			(250	)		(379
Total non-interest income (loss)	$	6,804			5,770		$	4,993		$	(4,099	)	$	7,797
Operating non-interest expense:
Salaries and employee benefits	$	13,011		$	13,619		$	12,885		$	12,986		$	12,920
Occupancy expense		3,643			3,021			3,305			3,404			3,043
Equipment expense		1,858			1,899			1,903			1,682			1,634
Data processing expense		1,118			1,058			1,111			1,065			1,133
Amortization of intangible assets		921			922			921			921			921
Insurance expense		1,433			1,479			1,261			2,013			2,064
Professional fees		412			879			1,215			765			1,220
Advertising expense		664			395			1,322			565			390
Problem loan costs		1,866			1,506			1,863			3,107			1,923
Real estate owned expense (income), net		108			448			635			(5	)		398
Office supplies expense		323			315			324			345			338
Other expense		1,869			1,432			1,499			934			1,965
Total non-interest expense		27,226			26,973			28,244			27,782			27,949
(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.

-10-

SUN BANCORP, INC. AND SUBSIDIARIES
AVERAGE BALANCE SHEETS (Unaudited)
(Dollars in thousands)
	For the Three Months Ended December 31,
	2011							2010
	Average		Income/		Yield/			Average		Income/		Yield/
	Balance		Expense		Cost			Balance		Expense		Cost
Interest-earning assets:
Loans receivable (1),(2):
Commercial and industrial	$	1,910,635	$	22,542		4.72	%	$	2,184,212		25,654		4.70	%
Home equity		226,345		2,348		4.15			241,510		2,744		4.54
Second mortgage		44,600		656		5.88			57,310		869		6.07
Residential real estate		111,514		1,338		4.80			88,144		1,179		5.35
Other		46,248		794		6.87			57,522		969		6.74
Total loans receivable		2,339,342		27,678		4.73			2,628,698		31,415		4.78
Investment securities(3)		548,355		3,375		2.46			491,588		4,216		3.43
Interest-earning bank balances		54,130		34		0.25			166,425		105		0.25
Total interest-earning assets		2,941,827		31,087		4.23			3,286,711		35,736		4.35
Non-interest earning assets:
Cash and due from banks		73,863							47,492
Bank properties and equipment, net		55,264							53,018
Goodwill and intangible assets, net		45,586							49,402
Other assets		113,159							146,024
Total non-interest-earning assets		287,872							295,936
Total assets	$	3,229,699						$	3,582,647
Interest-bearing liabilities:
Interest-bearing deposit accounts:
Interest-bearing demand deposits	$	1,271,991		1,435		0.45	%		1,387,423		2,581		0.74	%
Savings deposits		265,115		285		0.43			281,401		510		0.72
Time deposits		633,108		2,321		1.47			854,677		3,566		1.67
Total interest-bearing deposit accounts		2,170,214		4,041		0.74			2,523,501		6,657		1.06
Short-term borrowings:
Federal funds purchased		141		-		-			-		-		-
Securities sold under agreements to repurchase - customers		5,906		1		0.07			14,457		8		0.22
Long-term borrowings:
FHLBNY advances (4)		17,842		219		4.91			19,102		246		5.15
Obligation under capital lease		7,897		131		6.64			8,138		138		6.78
Junior subordinated debentures		92,786		695		3.00			92,786		1,032		4.45
Total borrowings		124,572		1,046		3.36			134,483		1,424		4.24
Total interest-bearing liabilities		2,294,786		5,087		0.89			2,657,984		8,081		1.22
Non-interest bearing liabilities:
Non-interest-bearing demand deposits		536,558							509,093
Other liabilities		87,569							118,452
Total non-interest bearing liabilities		624,127							627,545
Total liabilities		2,918,913							3,285,529
Shareholders' equity		310,786							297,118
Total liabilities and shareholders' equity	$	3,229,699						$	3,582,647
Net interest income			$	26,000						$	27,655
Interest rate spread (5)						3.34	%						3.13	%
Net interest margin (6)						3.54	%						3.37	%
Ratio of average interest-earning assets to average interest-bearing liabilities						128.20	%						123.65	%
(1)  Average balances include non-accrual loans and loans held-for-sale.
(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 adjustments for the three months ended December 31, 2011 and 2010 were $271 thousand and $382 thousand, 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.

-11-

SUN BANCORP, INC. AND SUBSIDIARIES
AVERAGE BALANCE SHEETS (Unaudited)
(Dollars in thousands)
	For the Twelve Months Ended December 31,
	2011							2010
	Average		Income/		Yield/			Average		Income/		Yield/
	Balance		Expense		Cost			Balance		Expense		Cost
Interest-earning assets:
Loans receivable (1),(2):
Commercial and industrial	$	1,954,701		92,107		4.71	%	$	2,245,118	$	105,210		4.69	%
Home equity		232,278		9,774		4.21			251,599		11,714		4.66
Second mortgage		48,998		2,863		5.84			62,349		3,889		6.24
Residential real estate		87,858		4,547		5.18			79,547		4,415		5.55
Other		51,041		3,502		6.86			60,874		4,163		6.84
Total loans receivable		2,374,876		112,793		4.75			2,699,487		129,391		4.79
Investment securities (3)		505,006		14,940		2.96			452,365		17,846		3.95
Interest-earning bank balances		117,830		288		0.24			69,803		166		0.24
Total interest-earning assets		2,997,712		128,021		4.27			3,221,655		147,403		4.58
Non-interest earning assets:
Cash and due from banks		72,455							47,393
Bank properties and equipment, net		54,589							52,944
Goodwill and intangible assets, net		46,961							95,010
Other assets		114,158							150,558
Total non-interest-earning assets		288,163							345,905
Total assets	$	3,285,875						$	3,567,560
Interest-bearing liabilities:
Interest-bearing deposit accounts:
Interest-bearing demand deposits	$	1,317,816	$	7,024		0.53	%	$	1,312,871	$	10,692		0.81	%
Savings deposits		271,970		1,412		0.52			295,121		2,283		0.77
Time deposits		675,464		10,301		1.53			899,038		15,805		1.76
Total interest-bearing deposit accounts		2,265,250		18,737		0.83			2,507,030		28,780		1.15
Short-term borrowings:
Federal funds purchased		36		-		-			16,907		89		0.53
Securities sold under agreements to repurchase - customers		6,681		7		0.10			16,069		30		0.18
Long-term borrowings:
FHLBNY advances (4)		18,316		884		4.83			22,710		1,076		4.74
Obligations under capital lease		7,988		527		6.60			8.212		550		6.70
Junior subordinated debentures		92,786		2,997		3.23			92,786		4,117		4.44
Total borrowings		125,807		4,415		3.51			156,684		5,861		3.74
Total interest-bearing liabilities		2,391,057		23,152		0.97			2,663,714		34,641		1.30
Non-interest bearing liabilities:
Non-interest-bearing demand deposits		509,678							481,757
Other liabilities		86,013							96,420
Total non-interest bearing liabilities		595,691							578,177
Total liabilities		2,986,748							3,241,891
Shareholders' equity		299,127							325,669
Total liabilities and shareholders' equity	$	3,285,875						$	3,567,560
Net interest income			$	104,869							112,762
Interest rate spread (5)						3.30	%						3.28	%
Net interest margin (6)						3.50	%						3.50	%
Ratio of average interest-earning assets to average interest-bearing liabilities						125.37	%						120.95	%
(1)  Average balances include non-accrual loans and loans held-for-sale.
(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 adjustments for the twelve months ended December 31, 2011 and 2010 were $1.3 million and $1.8 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.

-12-

SUN BANCORP, INC. AND SUBSIDIARIES
AVERAGE BALANCE SHEETS (Unaudited)
(Dollars in thousands)
	For the Three Months Ended
	December 31, 2011							September 30, 2011
	Average		Income/		Yield/			Average		Income/		Yield/
	Balance		Expense		Cost			Balance		Expense		Cost
Interest-earning assets:
Loans receivable (1),(2):
Commercial and industrial	$	1,910,635		22,542		4.72	%		1,901,394	$	23,028		4.84	%
Home equity		226,345		2,348		4.15			232,458		2,418		4.16
Second mortgage		44,600		656		5.88			47,844		698		5.84
Residential real estate		111,514		1,338		4.80			89,010		1,161		5.22
Other		46,248		794		6.87			49,361		844		6.84
Total loans receivable		2,339,342		27,678		4.73			2,320,067		28,149		4.85
Investment securities (3)		548,355		3,375		2.46			498,329		3,582		2.88
Interest-earning bank balances		54,130		34		0.25			118,350		71		0.24
Total interest-earning assets		2,941,827		31,087		4.23			2,936,746		31,802		4.33
Non-interest earning assets:
Cash and due from banks		73,863							72,744
Bank properties and equipment, net		55,264							55,461
Goodwill and intangible assets, net		45,586							46,511
Other assets		113,159							123,089
Total non-interest-earning assets		287,872							297,805
Total assets	$	3,229,699							3,234,551
Interest-bearing liabilities:
Interest-bearing deposit accounts:
Interest-bearing demand deposits	$	1,271,991		1,435		0.45	%		1,286,426	$	1,589		0.49	%
Savings deposits		265,115		285		0.43			270,196		321		0.48
Time deposits		633,108		2,321		1.47			631,415		2,388		1.51
Total interest-bearing deposit accounts		2,170,214		4,041		0.74			2,188,037		4,298		0.79
Short-term borrowings:
Federal Funds Purchased		141		-		-			-		-		-
Securities sold under agreements to repurchase - customers		5,906		1		0.07			6,952		1		0.06
Long-term borrowings:
FHLBNY advances (4)		17,842		219		4.91			18,162		223		4.91
Obligations under capital lease		7,897		131		6.64			7,959		132		6.63
Junior subordinated debentures		92,786		695		3.00			92,786		675		2.91
Total borrowings		124,572		1,046		3.36			125,859		1,031		3.28
Total interest-bearing liabilities		2,294,786		5,087		0.89			2,313,896		5,329		0.92
Non-interest bearing liabilities:
Non-interest-bearing demand deposits		536,558							528,505
Other liabilities		87,569							84,125
Total non-interest bearing liabilities		624,127							612,630
Total liabilities		2,918,913							2,926,526
Shareholders' equity		310,786							308,025
Total liabilities and shareholders' equity	$	3,229,699							3,234,551
Net interest income				26,000						$	26,473
Interest rate spread (5)						3.34	%						3.41	%
Net interest margin (6)						3.54	%						3.61	%
Ratio of average interest-earning assets to average interest-bearing liabilities						128.20	%						126.92	%
(1)  Average balances include non-accrual loans and loans held-for-sale.
(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 adjustments for the three months ended December 31, 2011 and September 30, 2011 were $271 thousand and $292 thousand, 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-