Sun Bancorp (SNBC) 8-K Sun Bancorp, Inc. Reports 2Q 2015 Net Income of $2.8 Million, or $0.15 per share; Improvement in Loan Growth, Capital Ratios and Expense Management

For Immediate Release

Sun Bancorp, Inc. Reports 2Q 2015 Net Income of $2.8 Million, or $0.15 per share; Improvement in Loan Growth, Capital Ratios and Expense Management

Contact:                 Mike Dinneen

Senior Vice President

(856) 552-5013

mdinneen@sunnb.com

Mount Laurel, N.J. – July 27, 2015

Second Quarter Highlights

·   Net income of $2.8 million, or $0.15 per share, for the quarter ended June 30, 2015, and $5.6 million, or $0.30 per share, for first half of 2015.

·   Net loan growth of $95 million, or 6.5%, in second quarter.

·   Solid capital foundation in place as tangible equity to assets improves from 6.6% in at June 30, 2014 to 9.2% at June 30, 2015.

·   Asset quality metrics remain strong with non-performing assets down 68% since June 30, 2014 to $6.2 million, or 0.3% of total assets at June 30, 2015.

·   Excess liquidity has declined, but remains elevated: average interest bearing cash totaled $329 million in the second quarter as liquidity deployment efforts increased, as compared to $475 million in the first quarter.

·   Quarterly operating expenses fall to $18.4 million with successful achievement of cost reduction goals representing an impressive 43% reduction when compared to the 2013 quarterly average.

Sun Bancorp, Inc. (NASDAQ: SNBC) (the "Company"), the holding company for Sun National Bank (the “Bank”), is reporting net income of $2.8 million, or $0.15 per diluted share, for the quarter ended June 30, 2015, compared to net income of $2.8 million, or $0.15 per diluted share, for the quarter ended March 31, 2015 and a net loss of $24.2 million, or a loss of $1.39 per diluted share, for the quarter ended June 30, 2014.

“We are generally pleased with the results of the second quarter and even more so with the underlying trends,” said Thomas M. O’Brien, President & CEO.  “The major restructuring announced at this time last year represented an aggressive multi-pronged attack on several legacy conditions which were creating unacceptable operating losses year after year.  In a few short quarters, we have successfully executed on the restructuring plan as evidenced by this quarter’s results.  Most impressively, operating expenses which had been running at $32.5 million per quarter in 2013 have been reduced by 43% to $18.4 million while capital ratios are much improved and net interest margin has begun to rebound.  Additionally, the Company’s asset quality measures which had been deficient for many years are now among the strongest in the region.  We knew that it would be a challenge to execute on so many initiatives while preparing to build back revenues in our new, more narrowly focused commercial banking strategies.  This renewed focus on growth combined with our ongoing efforts to improve cost efficiency and operate in a safe and sound manner has set the stage for creating shareholder value.”

Discussion of Results:

Balance Sheet

Total assets decreased to $2.38 billion at June 30, 2015, as compared to $2.43 billion at March 31, 2015 and $2.72 billion at December 31, 2014.  The decrease was due primarily to a decrease in cash and cash equivalents, partially offset by loan growth.  The Bank’s liquidity levels remain elevated, although cash and cash equivalents decreased to $278.9 million at June 30, 2015, as compared to $388.0 million at March 31, 2015 and $548.4 million at December 31, 2014. The overall decrease in cash and cash equivalents over the recent three and six month periods was primarily due to increases in loan originations, purchases of several multifamily loan participations and the completion of the sale of seven Bank locations in the first quarter of 2015.

Gross loans held-for-investment totaled $1.59 billion at June 30, 2015, as compared to $1.46 billion at March 31, 2015 and $1.49 billion at December 31, 2014.  The increase during the second quarter of 2015 was due primarily to the Bank funding approximately $48 million of 50% participation interest in multi-family loans residing in our market area, while organic loan originations totaled $137 million, including approximately $113 million in commercial real estate and $24 million in commercial and industrial loans.

Deposits were $1.88 billion at June 30, 2015, as compared to $1.96 billion at March 31, 2015 and $2.09 billion at December 31, 2014. The Bank continues to experience deposit reductions as a result of managed run-off of higher yielding municipal accounts and pricing of certain retail deposits.

The Bank designated $4.6 million in loans, $34.7 million in deposits, $580 thousand of cash and $375 thousand of fixed assets into held-for-sale at June 30, 2015 related to the pending sale of its Hammonton branch location to Cape Bank, which is scheduled to close in the third quarter of 2015. The Bank expects to record a gain on the sale of this location at closing.

“We began to see the results of our liquidity deployment efforts in the second quarter,” said O’Brien.  “Against the backdrop of our new relationship-based business development approach, we enjoyed net loan growth through our commercial platform, and the Bank’s non-interest demand deposits increased each month through the second quarter.  Continued relationship-based originations and the pending Hammonton branch sale will help us continue to further optimize our liquidity and right size our balance sheet.  While liquidity remains elevated, we have taken a cautious approach to its deployment in light of conflicting economic conditions.”

Net Interest Income and Margin

The net interest margin was 2.79% for the three months ended June 30, 2015 as compared to 2.57% for the three months ended March 31, 2015 and 3.03% for the three months ended June 30, 2014.  The increase in net interest margin for the three months ended June 30, 2015 as compared to the three months ended March 31, 2015 is primarily due to the increase in the average commercial loan balances, which increased by $43.6 million, or 4% over the prior quarter and a reduction in average cash balances.

“Our net interest margin continues to be below its optimal level as a result of our excess liquidity,” said O’Brien. “However, we are pleased with the net interest income increase from the first quarter as a result of the growth in our loan portfolio,” said O’Brien.  “Once we fully deploy our excess liquidity, we anticipate seeing our margin stabilize in the range of 3.10% to 3.20%.  We also continued to manage our deposit interest expense to more accurately reflect the market and the costs of providing our banking services, which led to a further decrease in deposit interest expense in the second quarter.  We believe our relationship approach to originating loans and gathering deposits is expected to gradually bring our net interest margin to forecasted levels.”

Non-Interest Income

Non-interest income was $4.9 million for the quarter ended June 30, 2015, as compared to $13.1 million and $4.0 million for the quarters ended March 31, 2015 and June 30, 2014, respectively. The decrease from the linked quarter was primarily attributable to a $9.2 million gain on the sale of seven Cape May area bank locations that was completed in the first quarter of 2015. Offsetting this decrease was a gain of $1.2 million on the sale of loans in the three months ended June 30, 2015. There were modest declines in deposit service charges and fees of $155 thousand and $614 thousand from the quarters ended March 31, 2015 and June 30, 2014, respectively, due to the overall reduction in accounts as a result of the branch reductions that have occurred over the past year. The three months ended June 30, 2014 included swap termination costs of $1.4 million associated with commercial loan sales recorded as a reduction of other income.  The quarter ended June 30, 2014 also included net mortgage banking revenue of $529 thousand, compared to $0 in the current quarter due to the prior year closure of the Company’s mortgage banking operations.

Non-Interest Expense

Non-interest expense for the second quarter of 2015 was $18.4 million, a decrease of $6.9 million from the first quarter of 2015 and a decrease of $15.3 million from the second quarter of 2014. During the first quarter of 2015, the Company recorded several restructuring charges related to the finalization of the Bank’s branch rationalization efforts, including $3.3 million of expenses associated with the pending branch consolidations and the sale of the Hammonton branch location. In the first quarter of 2015, problem loan expense of $988 thousand included $667 thousand of one-time costs associated with loan sales. In the second quarter of 2015, the balance in this category was $38 thousand due to significantly reduced volume.

“While we are still carrying lingering occupancy costs from our previously-announced branch consolidations, our quarterly expenses fell to $18.4 million, representing an annualized run rate of $73 million, well below our previous annualized level of $130 million in 2013,” said O’Brien.  “We are pleased with this substantial decline in operating expenses in the one year since our restructuring announcement, and it has effectively liberated the Bank from the substantial legacy expense burdens that were a consistent impediment to our operating profitability.  As a result, we are now actively investing our resources into relationship revenue generation and business development activities and the fruits of that labor are beginning to pay off.  With the remainder of our branch consolidations and pending Cape Bank sale taking place throughout the third quarter, we anticipate approaching a normalized operating expense run rate in the fourth quarter.  We will however, experience the final $500 thousand residual accelerated depreciation expense on these locations in the upcoming third quarter.”

Asset Quality

Non-performing assets continued to decline in the second quarter as the balance declined from $10.7 million at March 31, 2015 to $6.2 million at June 30, 2015 due to the sale of non-performing loans held-for-sale during the second quarter. Non-performing loans held-for-investment to total gross loans held-for-investment remained relatively flat at 0.37% at June 30, 2015 as compared to 0.36% at March 31, 2015 and declined from 0.73% at December 31, 2014.

There was negative provision for loan losses of $1.2 million recorded during the second quarter of 2015 compared to no provision for loan losses in the first quarter of 2015 and $14.8 million of provision for loan losses in the second quarter of 2014. In the second quarter of 2015, the Bank recorded gross recoveries of $2.1 million and recorded gross charge-offs of $1.1 million related to the transfer of problem loans to held-for-sale. The Bank recorded net recoveries of $615 thousand in the second quarter of 2015 as compared to net charge-offs of $2.3 million in the first quarter of 2015 and net charge-offs of $20.2 million in the second quarter of 2014. The allowance for loan losses was $20.3 million, or 1.29% of gross loans held-for-investment, at June 30, 2015, as compared to $20.9 million, or 1.41% of gross loans held-for-investment, at March 31, 2015 and $23.2 million, or 1.54% of gross loans held-for-investment, at December 31, 2014. The allowance for loan losses was 347% of non-performing loans held-for-investment at June 30, 2015 as compared to 383% at March 31, 2015 and 210% at December 31, 2014.

“Our asset quality metrics continue to be strong,” said O’Brien.  “Now that we have reduced our classified loans to very low levels, we are focused on proactively managing the risk in the existing portfolio and underwriting new deals conservatively to ensure that our risk profile remains safe and sound.  We are extremely pleased with the progress we have made in improving the quality of our portfolio.”

Capital

At June 30, 2015, the capital ratios of the Company and the Bank increased due to planned balance sheet runoff and net income of $2.8 million in the second quarter of 2015. At June 30, 2015, the Bank’s Tier 1 common equity risk-based capital ratio, total risk-based capital ratio, Tier 1 risk-based capital ratio and leverage capital ratio were approximately 17.5%, 18.8%, 17.5% and 11.5%, respectively. At June 30, 2015, the Company’s Tier 1 common equity risk-based capital ratio, total risk-based capital ratio, Tier 1 risk-based capital ratio and leverage capital ratio were approximately 13.8%, 20.8%, 17.2%, and 11.3%, respectively. The Company’s tangible equity to tangible assets ratio was 9.2% at June 30, 2015, as compared to 8.8% at March 31, 2015 and 7.7% at December 31, 2014.

“With two consecutive profitable quarters, we have been able to internally generate $5.6 million in capital through the first six months of 2015,” said O’Brien. “That, along with declining total assets and a further reduction in risk-weighted assets improved our solid regulatory capital ratios.  Our asset quality and capital metrics are near the top of our peer group.  This solid foundation gives us the capacity to now prudently grow our loan portfolio and revenues.  This quarter, we began to make progress in reducing our stubbornly-elevated efficiency ratio.  While we continue to have work ahead of us in growing revenue, managing expenses, controlling risk and building a brand, our goal remains to consistently create shareholder value and obtain the removal of our regulatory order.  This quarter is another significant step forward and it demonstrated our ability to generate earnings and operate with safe and sound practices.”

Conference Call

The Company will hold a conference call on Monday, July 27, 2015 at 11:00 AM (EST) to discuss results and answer questions from analysts and investors.  Participants may listen to or participate in the Company’s earnings conference call via the following:

·   Participants Toll-Free Number: 888-765-5574

·   Conference ID: 5330628

About Sun Bancorp, Inc.

Sun Bancorp, Inc. (NASDAQ: SNBC) is a $2.38 billion asset bank holding company headquartered in Mount Laurel, New Jersey. Its primary subsidiary is Sun National Bank, a community bank serving customers throughout New Jersey. Sun National 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.sunnationalbank.com.

Cautionary Note Regarding Forward-Looking Statements

The foregoing material contains forward-looking statements, as defined in the Private Securities Litigation Reform Act of 1995, which may be identified by the use of such words as “allow,” “anticipate,” “believe,” “continues,” “could,” “estimate,” “expect,” “intend,” “may,” “opportunity,” “outlook,” “plan,” “potential,” “predict,” “project,” “reflects,” “should,” “typically,” “usually,” “view,” “will,” “would,” and similar terms and phrases, including references to assumptions.  Examples of forward-looking statements include, but are not limited to, estimates with respect to the financial condition, results of operations and business of Sun Bancorp, Inc. (the “Company”) and its wholly-owned subsidiary Sun National Bank (the “Bank”), the banking industry, the economy in general, expectations of the business environment in which the Company operates, projections of future performance and other statements contained herein that are not historical facts.  These remarks are based upon current management expectations, and may, therefore, involve risks and uncertainties that cannot be predicted or quantified and are beyond the Company’s control and are subject to a variety of uncertainties that could cause future results to vary materially from the Company’s historical performance, or from current expectations.  Factors that could cause actual results to differ from those expressed or implied by such forward-looking statements include, but are not limited to: (i)  the ability of the Bank to comply with its written agreement with the Office of the Comptroller of the Currency (the “OCC”) or the individual minimum capital ratio for the Bank established by the OCC; (ii) the Company’s ability to attract and retain key management and staff; (iii) changes in business strategy or an inability to execute strategy due to the occurrence of unanticipated events; (iv) the ability to complete any or all of the transactions contemplated in the Company’s comprehensive strategic restructuring plan on the terms currently contemplated; (v) the ability to attract deposits and other sources of liquidity; (vi) changes in the financial performance and/or condition of the Bank’s borrowers; (vii) changes in consumer spending, borrowing and saving habits; (viii) the ability to increase market share and control expenses; (ix) changes in estimates of future loan loss reserve requirements based upon the periodic review thereof under relevant regulatory and accounting requirements; (x) local, regional and national economic conditions and events and the impact they may have on the Company and its customers; (xi) volatility in the credit and equity markets and its effect on the general economy; (xii) the credit risks of lending activities, including changes in the level and trend of loan delinquencies and write-offs; (xii) the overall quality of the composition of the Company’s loan and securities portfolios; (xiv) inflation, interest rate, securities market and monetary fluctuations;(xv) legislative and regulatory changes, including the Dodd-Frank Wall Street Reform and Consumer Protection Act and impending regulations, changes in banking, securities and tax laws and regulations and their application by regulators and changes in the scope and cost of the Federal Deposit Insurance Corporation insurance and other coverages; (xvi) the effects of, and changes in, monetary and fiscal policies and laws, including interest rate policies of the Board of Governors of the Federal Reserve System; (xvii) competition among providers of financial services; (xviii) other economic, competitive, governmental, regulatory and technological factors affecting our operations, pricing, products and services and the other risks detailed under the headings “Risk Factors” and “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in the Company’s Form 10-K for the fiscal year ended December 31, 2014, the Company’s Form 10-Q for the quarter ended March 31, 2015 and in other filings made pursuant to the Securities Exchange Act of 1934, as amended.  No undue reliance should be placed 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 such forward-looking statements to reflect the occurrence of anticipated or unanticipated events or circumstances after the date of such statements.

Non-GAAP Financial Measures (Unaudited)

 This news release references tangible book value per common share and return on average tangible equity, which are non-GAAP financial measures. Management believes that tangible book value per common share and return on average tangible equity are meaningful financial measures because they are two of the measures we use to assess capital adequacy.

Tangible book value per common share (dollars in thousands)

The following reconciles shareholders’ equity to tangible equity by reducing shareholders’ equity by the intangible asset balance at June 30, 2015, March 31, 2015, December 31, 2014, September 30, 2014, and June 30, 2014.

	June 30, 2015		March 31, 2015		December 31, 2014		September 30, 2014		June 30, 2014
Tangible book value per common share:
Shareholders’ equity	$	252,926	$	249, 235	$	245,323	$	247,047	$	227,656
Less: Intangible assets		38,188		38,188		38,188		38,188		38,426
Tangible equity	$	214,738	$	211,047	$	207,135	$	208,859	$	189,230
Common stock		18,901		18,901		18,901		18,885		17,752
Less: Treasury stock		237		282		285		300		319
Total outstanding shares		18,664		18,619		18,616		18,585		17,433
Tangible book value per common share:	$	11.51	$	11.34	$	11.13	$	11.24	$	10.85

Return on Average Tangible Equity (dollars in thousands)

The following provides the calculation of return on tangible equity for the three months ended June 30, 2015, March 31, 2015, December 31, 2014, September 30, 2014, and June 30, 2014.

Three Months Ended

	June 30, 2015			March 31, 2015			December  31, 2014			September 30, 2014			June 30, 2014
Net income(loss)	$	2,825		$	2,776		$	(2,829	)	$	(825	)	$	(24,248)
Average tangible equity:
Average shareholders’ equity	$	252,391		$	249,970		$	249,313		$	243,020		$	254,116
Less: Average intangible assets		38,188			38,188			38,188			38,281			38,568
Average tangible equity	$	214,203		$	211,782		$	211,125		$	204,739		$	215,548
Return on average tangible equity(1):		5.3	%		5.2	%		(5.4)	%		(1.6)	%		(45.0)%

	June 30, 2015			March 31, 2015			December 31, 2014			September 30, 2014			June 30, 2014
Net income(loss)	$	2,825		$	2,776		$	(2,829	)	$	(825	)	$	(24,248)
Average tangible equity:
Average shareholders’ equity	$	252,391		$	249,970		$	249,313		$	243,020		$	254,116
Less: Average intangible assets		38,188			38,188			38,188			38,281			38,568
Average tangible equity	$	214,203		$	211,782		$	211,125		$	204,739		$	215,548
Return on average tangible equity(1):		5.3	%		5.2	%		(5.4)	%		(1.6)	%		(45.0)%

(1)Annualized

SUN BANCORP, INC. AND SUBSIDIARIES

FINANCIAL HIGHLIGHTS (Unaudited)
(Dollars in thousands, except share and per share amounts)
	For the Three Months Ended												For the Six Months Ended
	June 30,												June 30,
		2015					2014						2015					2014
Profitability for the period:
Net interest income		$		15,375			$			20,612			$		30,566			$		42,004
Provision for loan losses				(1,218	)					14,803					(1,218		)			14,803
Non-interest income				4,879						3,977					17,966					8,926
Non-interest expense				18,363						33,677					43,581					61,565
Income(loss) before income taxes				3,109						(23,891	)				6,169					(25,438	)
Income tax expense				284						357					568					716
Net income(loss) available to common shareholders		$		2,825			$			(24,248	)		$		5,601			$		(26,154	)
Financial ratios:
Return on average assets(1)				0.5	%					(3.3)	%				0.4		%			(1.7)	%
Return on average equity(1)				4.5	%					(38.2)	%				4.5		%			(20.7)	%
Return on average tangible equity(1),(2)				5.3	%					(45.0)	%				5.3		%			(24.5)	%
Net interest margin(1)				2.79	%					3.03	%				2.68		%			3.05	%
Efficiency ratio				91	%					137	%				90		%			121	%
Income(loss) per common share:
Basic(3)		$		0.15			$			(1.39	)		$		0.30			$		(1.50	)
Diluted(3)		$		0.15			$			(1.39	)		$		0.30			$		(1.50	)
Average equity to average assets				10.4	%					8.5	%				10.0		%			8.37	%
			June 30,										December 31,
			2015			2014							2014
At period-end:
Total assets			$	2,379,023				$	2,894,658							2,715,348
Total deposits				1,876,721					2,272,765							2,091,904
Loans receivable, net of allowance for loan losses				1,558,576					1,827,724							1,486,898
Loans held-for-sale				2,006					29,171							4,083
Investments				353,245					454,051							409,950
Borrowings				92,578					68,734							68,978
Junior subordinated debentures				92,786					92,786							92,786
Shareholders’ equity				252,926					227,656							245,323
Credit quality and capital ratios:
Allowance for loan losses to gross loans held-for- investment				1.29		%			1.53			%				1.54			%
Non-performing loans held-for-investment to gross loans     held-for-investment				0.37		%			0.76			%				0.73			%
Non-performing assets to gross loans held-for-investment, loans held-for-sale and real estate owned				0.71		%			1.02			%				1.03			%
Allowance for loan losses to non-performing loans held-for-investment				347		%			202			%				210			%
Tier 1 common equity risk-based capital(4)(5):
Sun Bancorp, Inc.				13.8		%			-							-
Sun National Bank				17.5		%			-							-
Total risk-based capital(4):
Sun Bancorp, Inc.				20.8		%			15.0			%				19.3			%
Sun National Bank				18.8		%			14.5			%				17.4			%
Tier 1 risk-based capital(4):
Sun Bancorp, Inc.				17.2		%			12.4			%				16.7			%
Sun National Bank				17.5		%			13.2			%				16.1			%
Leverage capital(4):
Sun Bancorp, Inc.				11.3		%			8.6			%				10.1			%
Sun National Bank				11.5		%			9.1			%				9.7			%
Book value per common share (3)			$	13.55				$	13.39					$		13.18
Tangible book value per common share (3)			$	11.51				$	11.34					$		11.13
(1) Amounts for the three months ended are annualized.
(2) Return on average tangible equity, a non-GAAP measure, 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) Prior periods were retroactively adjusted for the impact of the 1-for-5 reverse stock split completed on August 11, 2014. (4) June 30, 2015 capital ratios are estimated, subject to regulatory filings. (5) The Basel III guidelines and the Dodd-Frank Act established a new minimum Tier 1 common equity risk-based capital ratio, effective January 1, 2015.

SUN BANCORP, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION (Unaudited)
(Dollars in thousands, except par value amounts)
	June 30,  2015			December 31, 2014
ASSETS
Cash and due from banks	$	28,544		$	42,548
Interest-earning bank balances		250,319			505,885
Cash and cash equivalents		278,863			548,433
Restricted cash		5,000			13,000
Investment securities available for sale (amortized cost of $336,979 and $394,733 at June 30, 2015 and December 31, 2014, respectively)		337,229			394,500
Investment securities held to maturity (estimated fair value of $470 and $501 at June 30, 2015 and December 31, 2014, respectively)		462			489
Loans receivable (net of allowance for loan losses of $20,331 and $23,246 at June 30, 2015 and December 31, 2014, respectively)		1,558,599			1,486,898
Loans held-for-sale, at lower of cost or market		2,006			4,083
Branch assets held-for-sale		5,604			69,064
Restricted equity investments, at cost		15,554			14,961
Bank properties and equipment, net		35,090			40,155
Real estate owned		-			522
Accrued interest receivable		5,233			5,397
Goodwill		38,188			38,188
Bank owned life insurance (BOLI)		80,147			79,132
Other assets		17,048			20,526
Total assets	$	2,379,023		$	2,715,348
LIABILITIES AND SHAREHOLDERS’ EQUITY
Liabilities:
Deposits	$	1,876,721		$	2,091,904
Branch deposits held-for-sale		34,689			183,395
Securities sold under agreements to repurchase – customers		-			1,156
Advances from the Federal Home Loan Bank of New York (FHLBNY)		85,698			60,787
Obligations under capital lease		6,880			7,035
Junior subordinated debentures		92,786			92,786
Deferred taxes, net		2,275			1,514
Other liabilities		27,048			31,448
Total liabilities		2,126,097			2,470,025
Shareholders’ equity:
Preferred stock, $1 par value, 1,000,000 shares authorized; none issued		-			-
Common stock, $5 par value, 40,000,000 shares authorized; 18,901,124 shares issued and 18,664,268 shares outstanding at June 30, 2015; 18,900,877 shares issued and 18,615,950 shares outstanding at December 31, 2014		94,506			94,508
Additional paid-in capital		511,975			514,071
Retained deficit		(342,158	)		(347,761	)
Accumulated other comprehensive loss		148			(138	)
Deferred compensation plan trust		(599	)		(599	)
Treasury stock at cost, 236,856 shares at June 30, 2015; and 284,927 shares at December 31, 2014		(10,946	)		(14,757	)
Total shareholders’ equity		252,926			245,324
Total liabilities and shareholders’ equity	$	2,379,023		$	2,715,348

SUN BANCORP, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS (Unaudited)
(Dollars in thousands, except per share amounts)
		For the Three Months Ended June 30,						For the Six Months Ended June 30,
		2015			2014			2015			2014
INTEREST INCOME
Interest and fees on loans	$	15,451		$	21,067		$	30,549		$	42,916
Interest on taxable investment securities		1,831			2,193			3,877			4,443
Interest on non-taxable investment securities		309			308			615			617
Dividends on restricted equity investments		202			209			411			441
Total interest income		17,793			23,777			35,452			48,417
INTEREST EXPENSE
Interest on deposits		1,337			2,188			2,843			4,469
Interest on funds borrowed		536			443			966			879
Interest on junior subordinated debentures		545			534			1,077			1,065
Total interest expense		2,418			3,165			4,886			6,413
Net interest income		15,375			20,612			30,566			42,004
PROVISION FOR LOAN LOSSES		(1,218	)		14,803			(1,218	)		14,803
Net interest income after provision for loan losses		16,593			5,809			31,784			27,201
NON-INTEREST INCOME
Deposit service charges and fees		1,849			2,463			3,853			4,858
Interchange fees		554			629			1,098			1,192
Mortgage banking revenue, net		-			529			-			1,164
Gain on sale of bank branches		-			-			9,235			-
Gain on sale of loans		1,226			-			1,239			-
Investment products income		488			715			1,077			1,332
BOLI income		503			469			1,015			930
Other		259			(828)			449			(550	)
Total non-interest income		4,879			3,977			17,966			8,926
NON-INTEREST EXPENSE
Salaries and employee benefits		9,120			16,803			19,710			30,584
Occupancy expense		3,034			3,552			8,001			7,818
Equipment expense		1,500			2,356			5,014			4,105
Data processing expense		1,304			1,281			2,612			2,478
Professional fees		711			2,353			1,547			3,839
Insurance expenses		1,094			1,358			2,341			2,825
Advertising expense		223			523			458			1,109
Problem loan expense		38			566			1,026			1,198
Other		1,339			4,885			2,872			7,609
Total non-interest expense		18,363			33,677			43,581			61,565
INCOME(LOSS) BEFORE INCOME TAXES		3,109			(23,891	)		6,169			(25,438	)
INCOME TAX EXPENSE		284			357			568			716
NET INCOME(LOSS) AVAILABLE TO COMMON SHAREHOLDERS	$	2,825		$	(24,248	)	$	5,601		$	(26,154	)
Basic earnings(loss) per share(1)	$	0.15		$	(1.39	)	$	0.30		$	(1.50	)
Diluted earnings(loss) per share(1)	$	0.15		$	(1.39	)	$	0.30		$	(1.50	)
Weighted average shares – basic(1)	18,632,526			17,417,829			18,624,585			17,383,192
Weighted average shares - diluted(1)	18,684,597			17,417,829			18,663,721			17,383,192

(1) Prior periods were retroactively adjusted for the impact of the 1-for-5 reverse stock split completed on August 11, 2014

SUN BANCORP, INC. AND SUBSIDIARIES
HISTORICAL TRENDS IN QUARTERLY FINANCIAL DATA (Unaudited)
(Dollars in thousands)
	2015			2015			2014			2014			2014
	Q2			Q1			Q4			Q3			Q2
Balance sheet at quarter end:
Cash and cash equivalents	$	278,863		$	388,021		$	548,433		$	504,353		$	330,440
Restricted cash		5,000			13,000			13,000			13,000			26,000
Investment securities		353,245			367,178			409,950			425,079			454,051
Loans held-for-investment:
Commercial and industrial		1,153,310			1,042,821			1,052,932			1,196,767			1,363,900
Home equity		139,789			145,806			174,165			173,227			186,953
Residential real estate		266,312			273,118			276,993			299,838			298,063
Other		19,519			22,427			6,054			6,577			7,200
Total gross loans held-for-investment		1,578,930			1,484,172			1,510,144			1,676,409			1,856,116
Allowance for loan losses		(20,331	)		(20,916	)		(23,246	)		(26,540	)		(28,392	)
Net loans held-for-investment		1,558,599			1,463,256			1,486,898			1,649,869			1,827,724
Loans held-for-sale		2,006			4,766			4,083			7,365			29,171
Branch assets held-for-sale		5,604			5,419			69,064			31,408			34,058
Goodwill		38,188			38,188			38,188			38,188			38,188
Intangible assets		-			-			-			-			238
Total assets		2,379,023			2,436,391			2,715,348			2,820,202			2,894,658
Total deposits		1,876,721			1,959,556			2,091,904			2,170,627			2,272,765
Branch deposits held-for-sale		34,689			33,381			183,395			192,068			160,769
Securities sold under agreements to repurchase - customers		-			156			1,156			963			670
Advances from FHLBNY		85,698			60,743			60,787			60,830			60,873
Obligations under capital lease		6,880			6,958			7,035			7,111			7,191
Junior subordinated debentures		92,786			92,786			92,786			92,786			92,786
Total shareholders' equity		252,926			249,235			245,323			247,047			227,656
Quarterly average balance sheet:
Loans(1):
Commercial and industrial	$	1,095,202		$	1,051,610		$	1,145,297		$	1,292,705		$	1,480,491
Home equity		161,698			183,753			196,841			201,754			210,068
Residential real estate		271,585			284,197			301,326			322,751			338,028
Other		2,122			3,233			3,391			3,755			23,196
Total gross loans		1,530,607			1,522,793			1,646,855			1,820,965			2,051,783
Securities and other interest-earning assets		699,687			867,633			923,909			840,541			694,529
Total interest-earning assets		2,230,294			2,390,426			2,570,764			2,661,506			2,746,312
Total assets		2,419,520			2,600,231			2,785,525			2,888,920			2,982,427
Non-interest-bearing demand deposits		521,563			559,793			608,396			612,775			573,290
Total deposits		1,956,592			2,162,142			2,331,934			2,429,606			2,519,901
Total interest-bearing liabilities		1,617,176			1,763,062			1,885,250			1,978,480			2,108,103
Total shareholders' equity		252,391			249,970			249,313			243,020			254,116
Capital and credit quality measures:
Tier 1 common equity risk-based capital (2))(3):
Sun Bancorp, Inc.		13.8	%		13.4	%		-			-			-
Sun National Bank		17.5	%		17.2	%		-			-			-
Total risk-based capital (2):
Sun Bancorp, Inc.		20.8	%		20.4	%		19.3	%		17.9	%		15.0	%
Sun National Bank		18.8	%		18.4	%		17.4	%		16.2	%		14.5	%
Tier 1 risk-based capital (2):
Sun Bancorp, Inc.		17.2	%		16.8	%		16.7	%		15.6	%		12.4	%
Sun National Bank		17.5	%		17.1	%		16.1	%		14.9	%		13.2	%
Leverage capital (2):
Sun Bancorp, Inc.		11.3	%		10.3	%		10.1	%		9.8	%		8.6	%
Sun National Bank		11.5	%		10.5	%		9.7	%		9.4	%		9.1	%
Average equity to average assets		10.4	%		9.6	%		9.0	%		8.4	%		8.5	%
Allowance for loan losses to total gross loans held-for-investment		1.29	%		1.41	%		1.54	%		1.58	%		1.50	%
Non-performing loans held-for-investment to gross loans held-for-investment		0.37	%		0.36	%		0.73	%		0.84	%		0.76	%
Non-performing assets to gross loans held-for-investment, loans held-for-sale and real estate owned		0.40	%		0.72	%		1.03	%		1.07	%		1.02	%
Allowance for loan losses to non-performing loans held-for-investment		347	%		383	%		210	%		188	%		202	%
Other data:
Net recoveries (charge-offs)	$	615		$	(2,312)		$	(3,294)		$	(1,852)		$	(20,179)
Classified loans		7,940			8,461			24,261			21,022			33,077
Classified assets		11,147			11,998			27,986			25,338			38,226
Non-performing assets:
Non-accrual loans		5,156			4,611			10,729			13,561			13,470
Non-accrual loans held-for-sale		389			4,766			4,083			2,770			4,086
Troubled debt restructurings, non-accrual		702			854			318			528			583
Real estate owned, net		-			468			522			1,084			1,327
Total non-performing assets	$	6,247		$	10,699		$	15,652		$	17,943		$	19,466
(1)Average balances include non-accrual loans and loans held-for-sale. (2)June 30, 2015 capital ratios are estimated, subject to regulatory filings. (3)The Basel III guidelines and the Dodd-Frank Act established a new minimum Tier 1 common equity risk-based capital ratio, effective January 1, 2015.

SUN BANCORP, INC. AND SUBSIDIARIES
HISTORICAL TRENDS IN QUARTERLY FINANCIAL DATA (Unaudited)
(Dollars in thousands, except share and per share amounts)
	2015			2015			2014			2014			2014
	Q2			Q1			Q4			Q3			Q2
Profitability for the quarter:
Net interest income	$	15,375		$	15,191		$	17,026		$	18,921		$	20,612
Provision for loan losses		(1,218	)		-			-			-			14,803
Non-interest income		4,879			13,087			4,142			4,695			3,977
Non-interest expense excluding amortization of intangible assets		18,363			25,218			23,705			23,894			33,394
Amortization of intangible assets		-			-			-			238			283
Income(loss) before income taxes		3,109			3,060			(2,537	)		(516	)		(23,891	)
Income tax expense		284			284			292			309			357
Net income(loss) available to common shareholders	$	2,825		$	2,776		$	(2,829)		$	(825)		$	(24,248)
Financial ratios:
Return on average assets (1)		0.5	%		0.4	%		(0.4)	%		(0.1)	%		(3.3)	%
Return on average equity (1)		5.0	%		4.4	%		(4.5)	%		(1.4)	%		(38.2)	%
Return on average tangible equity (1),(2)		5.3	%		5.2	%		(5.4)	%		(1.6)	%		(45.0)	%
Net interest margin (1)		2.79	%		2.57	%		2.67	%		2.87	%		3.03	%
Efficiency ratio		91	%		89	%		112	%		95	%		137	%
Per share data:
Income(loss) per common share:
Basic(3)	$	0.15		$	0.15		$	(0.15	)	$	(0.05	)	$	(1.39	)
Diluted(3)	$	0.15		$	0.15		$	(0.15	)	$	(0.05	)	$	(1.39	)
Book value(3)	$	13.55		$	13.39		$	13.18		$	13.29		$	13.06
Tangible book value(3)	$	11.51		$	11.34		$	11.13		$	11.24		$	10.85
Average basic shares(3)	18,632,526			18,616,537			18,589,717			17,417,829			17,348,169
Average diluted shares(3)	18,684,597			18,639,501			18,589,717			17,417,829			17,348,169
Non-interest income:
Deposit service charges and fees	$	1,849		$	2,004		$	2,383		$	2,541		$	2,463
Interchange fees		554			544			540			624			629
Mortgage banking revenue, net		-			-			29			423			529
Gain on sale of loans		1,226			-			-			-			-
Net gain on sale of bank branches		-			9,235			-			-			-
Investment products income		488			589			480			635			715
BOLI income		503			512			482			484			469
Other income		259			203			228			(42	)		(828	)
Total non-interest income	$	4,879		$	13,087		$	4,142		$	4,695		$	3,977
Non-interest expense:
Salaries and employee benefits	$	9,120		$	10,590		$	9,412		$	11,818		$	16,803
Occupancy expense		3,034			4,967			5,432			2,980			3,552
Equipment expense		1,500			3,514			1,487			1,695			2,356
Data processing expense		1,304			1,308			1,202			1,299			1,281
Professional fees		711			836			1,225			1,423			2,353
Insurance expense		1,094			1,247			1,299			1,443			1,358
Advertising expense		223			235			386			567			523
Problem loan expense		38			988			547			294			566
Other expense		1,339			1,533			2,715			2,613			4,885
Total non-interest expense	$	18,363		$	25,218		$	23,705		$	24,132		$	33,677
(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) Prior periods were retroactively adjusted for the impact of the 1-for-5 reverse stock split completed on August 11, 2014.

SUN BANCORP, INC. AND SUBSIDIARIES
AVERAGE BALANCE SHEETS (Unaudited)
(Dollars in thousands)
	For the Three Months Ended June 30,
	2015							2014
	Average		Income/		Yield/			Average		Income/		Yield/
	Balance		Expense		Cost			Balance		Expense		Cost
Interest-earning assets:
Loans receivable (1),(2):
Commercial and industrial	$	1,095,202	$	11,285		4.12	%	$	1,480,491	$	15,385		4.16	%
Home equity		161,698		1,685		4.17			185,710		1,777		3.83
Residential real estate		271,585		2,443		3.60			338,028		3,187		3.77
Other		2,122		39		7.35			47,554		717		6.03
Total loans receivable		1,530,607		15,452		4.04			2,051,783		21,066		4.11
Investment securities(3)		370,469		2,300		2.48			451,477		2,723		2.41
Interest-earning bank balances		329,218		208		0.25			243,052		154		0.25
Total interest-earning assets		2,230,294		17,960		3.22			2,746,312		23,943		3.49
Non-interest earning assets:
Cash and due from banks		34,014							67,196
Bank properties and equipment, net		36,328							47,586
Goodwill and intangible assets, net		38,188							38,568
Other assets		80,696							82,765
Total non-interest-earning assets		189,226							236,115
Total assets	$	2,419,520						$	2,982,427
Interest-bearing liabilities:
Interest-bearing deposit accounts:
Interest-bearing demand deposits	$	793,954	$	345		0.17	%	$	1,099,385	$	790		0.29	%
Savings deposits		222,372		108		0.19			264,386		177		0.27
Time deposits		418,703		884		0.84			582,840		1,223		0.84
Total interest-bearing deposit accounts		1,435,029		1,337		0.37			1,946,611		2,190		0.45
Short-term borrowings:
Fed Funds Purchased		-		-		-			-		-		-
Securities sold under agreements to repurchase - customers		29		-		-			598		-		0.09
Long-term borrowings:
FHLBNY advances (4)		82,416		418		2.03			60,887		315		2.07
Obligations under capital lease		6,916		118		6.82			7,221		127		7.04
Junior subordinated debentures		92,786		545		2.35			92,786		533		2.30
Total borrowings		182,147		1,081		2.37			161,492		975		2.41
Total interest-bearing liabilities		1,617,176		2,418		0.60			2,108,103		3,165		0.60
Non-interest bearing liabilities:
Non-interest-bearing demand deposits		521,563							573,290
Other liabilities		28,392							46,918
Total non-interest bearing liabilities		549,955							620,208
Total liabilities		2,167,131							2,728,311
Shareholders' equity		252,391							254,116
Total liabilities and shareholders' equity	$	2,419,522						$	2,982,427
Net interest income			$	15,543						$	20,778
Interest rate spread (5)						2.62	%						2.89	%
Net interest margin (6)						2.79	%						3.03	%
Ratio of average interest-earning assets to average interest-bearing liabilities						138	%						130	%
(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 June 30, 2015 and 2014 were $167 thousand and $166 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.

SUN BANCORP, INC. AND SUBSIDIARIES
AVERAGE BALANCE SHEETS (Unaudited)
(Dollars in thousands)
	For the Six Months Ended June 30,
	2015							2014
	Average		Income/		Yield/			Average		Income/		Yield/
	Balance		Expense		Cost			Balance		Expense		Cost
Interest-earning assets:
Loans receivable (1),(2):
Commercial	$	1,073,526	$	22,089		4.12	%	$	1,520,246		31,735		4.17	%
Home equity		172,664		3,533		4.09			210,986		4,222		4.00
Residential real estate		277,856		4,842		3.49			334,749		6,145		3.67
Other		2,675		84		6.28			24,100		814		6.76
Total loans receivable		1,526,721		30,548		4.00			2,090,081		42,916		4.11
Investment securities(3)		381,494		4,729		2.48			454,590		5,541		2.44
Interest-earning bank balances		401,702		505		0.25			231,645		292		0.25
Total interest-earning assets		2,309,917		35,782		3.10			2,776,316		48,749		3.51
Non-interest earning assets:
Cash and due from banks		33,867							41,269
Restricted cash		6,464							26,000
Bank properties and equipment, net		39,465							48,093
Goodwill and intangible assets, net		38,188							38,709
Other assets		81,476							85,303
Total non-interest-earning assets		199,460							239,374
Total assets	$	2,509,377						$	3,015,690
Interest-bearing liabilities:
Interest-bearing deposit accounts:
Interest-bearing demand deposits	$	844,124	$	751		0.18	%	$	1,124,284		1,597		0.28	%
Savings deposits		230,865		235		0.20			265,837		357		0.27
Time deposits		443,238		1,857		0.84			595,459		2,515		0.84
Total interest-bearing deposit accounts		1,518,227		2,843		0.37			1,985,580		4,469		0.45
Short-term borrowings:
Securities sold under agreements to repurchase - customers		101		-		-			502		-		-
Long-term borrowings:
FHLBNY advances (4)		71,647		728		2.03			60,908		628		2.06
Obligations under capital lease		6,955		238		6.84			7,257		250		6.89
Junior subordinated debentures		92,786		1,077		2.32			92,786		1,065		2.30
Total borrowings		171,489		2,043		2.38			161,453		1,943		2.41
Total interest-bearing liabilities		1,689,716		4,886		0.58			2,147,033		6,412		0.60
Non-interest bearing liabilities:
Non-interest-bearing demand deposits		540,572							566,486
Other liabilities		27,902							49,631
Total non-interest bearing liabilities		568,474							616,117
Total liabilities		2,258,190							2,763,150
Shareholders' equity		251,187							252,540
Total liabilities and shareholders' equity	$	2,509,377						$	3,015,690
Net interest income			$	30,896						$	42,337
Interest rate spread (5)						2.52	%						2.91	%
Net interest margin (6)						2.68	%						3.05	%
Ratio of average interest-earning assets to average interest-bearing liabilities						137	%						129	%
(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 six months ended June 30, 2015 and 2014 were $330 thousand and $333 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.

SUN BANCORP, INC. AND SUBSIDIARIES
AVERAGE BALANCE SHEETS (Unaudited)
(Dollars in thousands)
	For the Three Months Ended
	June 30, 2015							March 31, 2015
	Average		Income/		Yield/			Average		Income/		Yield/
	Balance		Expense		Cost			Balance		Expense		Cost
Interest-earning assets:
Loans receivable (1),(2):
Commercial and industrial	$	1,095,202	$	11,285		4.12	%	$	1,051,610	$	10,803		4.11	%
Home equity		161,698		1,685		4.17			183,753		1,848		4.02
Residential real estate		271,585		2,443		3.60			284,197		2,399		3.38
Other		2,122		39		7.35			3,233		47		5.82
Total loans receivable		1,530,607		15,452		4.04			1,522,793		15,097		3.97
Investment securities(3)		370,469		2,300		2.48			392,642		2,430		2.48
Interest-earning bank balances		329,218		208		0.25			474,991		297		0.25
Total interest-earning assets		2,230,294		17,960		3.22			2,390,426		17,824		2.98
Non-interest earning assets:
Cash and due from banks		34,014							46,718
Bank properties and equipment, net		36,328							42,638
Goodwill and intangible assets, net		38,188							38,188
Other assets		80,696							82,261
Total non-interest-earning assets		189,226							209,805
Total assets	$	2,419,520						$	2,600,231
Interest-bearing liabilities:
Interest-bearing deposit accounts:
Interest-bearing demand deposits	$	793,954	$	345		0.17	%	$	894,851	$	406		0.18	%
Savings deposits		222,372		108		0.19			239,452		127		0.21
Time deposits		418,703		884		0.84			468,046		973		0.83
Total interest-bearing deposit accounts		1,435,029		1,337		0.37			1,602,349		1,506		0.38
Short-term borrowings:
Federal funds purchased		-		-		-			-		-		-
Securities sold under agreements to repurchase - customers		29		-		-			175		-		0.00
Long-term borrowings:
FHLBNY advances (4)		82,416		418		2.03			60,758		310		2.04
Obligations under capital lease		6,916		118		6.82			6,994		120		6.86
Junior subordinated debentures		92,786		545		2.35			92,786		533		2.30
Total borrowings		182,147		1,081		2.37			160,713		963		2.40
Total interest-bearing liabilities		1,617,176		2,418		0.60			1,763,062		2,469		0.56
Non-interest bearing liabilities:
Non-interest-bearing demand deposits		521,563							559,793
Other liabilities		28,392							27,406
Total non-interest bearing liabilities		549,955							587,199
Total liabilities		2,167,131							2,350,261
Shareholders' equity		252,391							249,970
Total liabilities and shareholders' equity	$	2,419,522						$	2,600,231
Net interest income			$	15,543						$	15,355
Interest rate spread (5)						2.62	%						2.42	%
Net interest margin (6)						2.79	%						2.57	%
Ratio of average interest-earning assets to average interest-bearing liabilities						138	%						136	%
(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 June 30, 2015 and March 31, 2015 were $167 thousand and $164 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.

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