[LOGO] SUN
Bancorp, Inc.
News Release
For Immediate Release
Contact: Dan Chila, EVP, Chief Financial Officer (856) 691-7700
Sun Bancorp, Inc. Reports Second Quarter Results;
Outlines Further Moves to Improve Profitability
Our mission is uncompromising...
...to be the Premier Community Bank in every community we serve
VINELAND, NJ, July 24, 2006 - Sun Bancorp, Inc. (NASDAQ:SNBC) today reported net
income of $3.8 million, or $.18 per share, for the quarter ended June 30, 2006,
compared to net income of $4.8 million, or $.24 per share, for the second
quarter of 2005. The current quarter includes approximately $400,000 in pre-tax
severance related charges ($.01 per share). Earnings per share data is adjusted
for the 5% common stock dividend declared in April 2006 and paid on May 18,
2006.
For the six months ended June 30, 2006, the Company reported net income
of $8.0 million, or $.38 per share, compared to $9.9 million, or $.49 per share,
in the prior period.
"The reported second quarter results are in line with our preliminary
announcement of June 26, 2006," said Thomas A. Bracken, president and chief
executive officer of Sun Bancorp, Inc. and its wholly owned subsidiary Sun
National Bank. "As I stated in the June 26 preliminary release, we have
intensified our focus on enhancing profitability. We are currently conducting an
internal review and assessment of our operations which will lead to further
measures during 2006 to increase revenue and reduce the annualized run rate of
overhead expenses."
"Today we are announcing several prudent and necessary new initiatives
that will significantly contribute to our improved performance goal," Bracken
said.
The developments outlined below are in addition to Sun's June 26
announcement, in which the Company said it was reducing staff by about 8%
company-wide to produce an annualized pre-tax cost savings of approximately $3.5
million.
--more--
Sun Bancorp 2Q 2006 - page two
o The Company continues to evaluate the scope and efficiency of its
branch network and has identified a total of five branches that will
be sold or consolidated over the balance of 2006. The annualized run
rate of expense savings is projected at approximately $1.0 million.
o The Company has reviewed several of its major operating services
vendor contracts and has negotiated, or is in the final stages of
negotiating, new and/or updated contracts that are expected to produce
an estimated annualized savings of $1.0 million for 2007.
o The Company continues to review and evaluate non-interest income
opportunities. Several fee enhancements that are expected to increase
annualized fee income by approximately $1.4 million have been
identified and implemented.
"These specific new initiatives, combined with the previously announced
staff reductions, are expected to increase our annual pre-tax revenue run rate
by approximately $7.0 million in 2007," according to Bracken.
"We are also focused on improving the performance of our retail franchise.
As we noted in our June 26 release, we are optimistic that the consulting
initiatives currently underway with Ms. Anat Bird, combined with the national
search for a senior executive to head the retail business, will result in
significant progress toward achieving a high-performance retail banking
organization. We are already seeing the effect of Ms. Bird's engagement in our
second quarter non-interest income increase," Bracken said. "With the external
environment as challenging as it is, we will intensify our internal focus to
become as efficient and productive as we need to be. To that end, we have made
some tough decisions and will need to make more. We are committed to finish the
job we set out to do five years ago - to transform Sun Bank into a high
performing, dominant bank within our footprint. To do that, we need to improve
our profit significantly while enhancing our customer service and continuing to
increase our marketplace momentum. Everything we are doing is targeted at those
goals."
In shifting his commentary to the key factors driving results during the
second quarter, Bracken said the Company, "again had good sequential quarter
loan growth, net interest margin increased and was better than forecasted,
credit quality remained stable, and non-interest income is trending favorably.
Non-interest expenses and our efficiency ratio increased over the linked quarter
and are the focus of our attention and are proactively being addressed."
--more--
Sun Bancorp 2Q 2006 - page three
The following is an overview of the key financial highlights for the
quarter:
o Total assets were $3.210 billion at June 30, 2006, compared to $3.286
billion at March 31, 2006, and $3.141 billion at June 30, 2005. On
January 19, 2006, the Company acquired assets of approximately $164
million and recorded purchase adjustments of approximately $23 million
from the acquisition of Advantage Bank.
o Total loans before allowance for loan losses were $2.295 billion at
June 30, 2006, an increase of $356.7 million, or 18.4%, over total
loans at June 30, 2005, and a linked quarter increase of $80.6
million, or 3.6%, over March 31, 2006.
o Credit quality trends remain stable. Total non-performing assets were
$12.4 million at June 30, 2006, or 0.54% of total loans and real
estate owned, a decrease of $1.8 million from $14.2 million, or 0.73%
of total loans and real estate owned at June 30, 2005. On a linked
quarter basis, total non-performing assets decreased $580,000, or
4.5%. The Bank has outstanding loans totaling $4.9 million that are
either directly or indirectly related to a real estate investor in
Monmouth County, NJ, who has been accused of engaging in fraudulent
activities with a large local bank. All loans are performing and well
secured by commercial real estate in Monmouth County and first
mortgage liens on his personal residence.
o Total deposits were $2.586 billion at June 30, 2006, an increase of
$44.8 million, or 1.8%, over deposits at June 30, 2005, and a decrease
of $17.0 million, or 0.7%, over the linked quarter.
o Net interest income (tax-equivalent basis) for the second quarter of
$25.3 million increased $737,000 over the linked quarter. Net interest
margin for the quarter of 3.48% increased over the linked first
quarter margin of 3.40%.
--more--
Sun Bancorp 2Q 2006 - page four
o Total operating non-interest income for the quarter of $5.1 million
increased 18.4% over the comparable prior year period and increased
14.8% over the linked first quarter 2006. The increase over the prior
year period was primarily due to increases of approximately $160,000
in total non-interest income from the January 2006 Advantage Bank
acquisition, $230,000 in service charge income, $130,000 in third
party investment products revenue, $75,000 in debit card fee income,
$60,000 in gain on sale of loans, and $65,000 in residential mortgage
fees. The linked quarter increase is primarily due to increases in
service charge income of approximately $498,000, and residential
mortgage fees of $70,000. Offsetting these increases in the linked
quarter was a decrease in gain on sale of loans of approximately
$125,000.
o Total operating non-interest expenses, excluding $400,000 in severance
related charges for the quarter, were $23.2 million, up $1.9 million,
or 8.9%, over the comparable prior year period. Of the $1.9 million,
approximately $900,000 relates to the Advantage Bank acquisition. The
remaining increase is primarily due to increases of approximately
$300,000 in salaries and benefits, $160,000 in professional fees
relating to non-performing assets, and $140,000 on the loss on the
sale of real estate owned. Linked quarter operating expenses increased
$961,000, or 4.3%. This was primarily due to a $242,000 increase in
total non-interest expenses relating to a full second quarter of
Advantage Bank expenses, an increase in marketing expenses of
$120,000, and an increase in the loss on the sale of real estate owned
of approximately $170,000.
Sun Bancorp, Inc. will host a conference call with analysts and
investment professionals on Tuesday, July 25, 2006, at 11:30 a.m. ET. Interested
parties may listen to the live call by dialing 1-800-391-2548 and giving the
verbal passcode: vi352014. Listeners may also access the live Web cast through
the Sun Bancorp Web site at www.sunnb.com. An Internet-based replay will be
available at the Web site for 48 hours following the call.
--more--
Sun Bancorp 2Q 2006 - page five
Sun Bancorp, Inc. is a multi-state bank holding company headquartered
in Vineland, New Jersey. Its primary subsidiary is Sun National Bank, serving
customers through 80 branch locations in Southern and Central New Jersey,
Philadelphia, PA, and New Castle County, DE. 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.
--more--
Page 6
SUN BANCORP, INC. AND SUBSIDIARIES
FINANCIAL HIGHLIGHTS (unaudited)
(Dollars in thousands, except per share data)
Three months ended Six months ended
----------------------------------------------------------------
June 30, June 30,
-------- --------
2006 2005 2006 2005
---- ---- ---- ----
Profitability for the period:
Net interest income $ 25,113 $ 24,079 $ 49,534 $ 48,307
Provision for loan losses 875 765 1,500 1,290
Non-interest income 5,063 5,095 9,459 9,280
Non-interest expense 23,634 21,322 45,907 41,756
Income before income taxes 5,667 7,087 11,586 14,541
Net income $ 3,790 $ 4,830 $ 7,963 $ 9,943
======== ======== ======== ========
Return on average assets (1) 0.47% 0.62% 0.49% 0.65%
Return on average equity (1) 4.66% 6.79% 4.99% 7.02%
Return on average tangible equity (1), (2) 9.17% 13.15% 9.77% 13.54%
Net interest margin (1) 3.48% 3.48% 3.44% 3.52%
Efficiency ratio 78.32% 73.08% 77.82% 72.51%
Per share data:
Earnings per common share (3):
Basic $0.19 $0.25 $0.40 $0.52
Diluted $0.18 $0.24 $0.38 $0.49
Average equity to average assets 10.01% 9.16% 9.85% 9.18%
June 30, December 31,
-------- ------------
2006 2005 2005
---- ---- ----
At period-end:
Assets $ 3,210,126 $ 3,140,962 $ 3,107,889
Deposits 2,586,034 2,541,214 2,471,648
Loans, net 2,270,596 1,916,028 2,027,753
Investments 548,726 817,987 729,066
Borrowings 169,027 212,201 243,567
Shareholders' Equity 327,669 287,632 295,653
Credit quality and capital ratios:
ALLL to total loans 1.08% 1.16% 1.10%
Non-performing assets to total loans
and real estate owned 0.54% 0.73% 0.56%
Total allowance for loan losses to
non-performing loans 210.06% 176.32% 221.86%
Total Capital (to Risk-Weighted Assets) (4):
Sun Bancorp, Inc. 11.62% 10.89% 11.11%
Sun National Bank 10.37% 10.33% 10.50%
Tier I Capital (to Risk-Weighted Assets) (4):
Sun Bancorp, Inc. 10.65% 9.90% 10.14%
Sun National Bank 9.40% 9.34% 9.53%
Leverage Ratio (4):
Sun Bancorp, Inc. 9.10% 7.77% 8.20%
Sun National Bank 8.03% 7.34% 7.70%
Book value (3) $16.06 $15.10 $15.50
Tangible book value (3) $8.25 $7.91 $8.43
(1) Annualized.
(2) Return on average tangible equity is computed by dividing annualized net
income for the period by average tangible equity. Average tangible equity
equals average equity less average identifiable intangible assets and
goodwill.
(3) Data is adjusted for a 5% stock dividend declared in April 2006.
(4) June 30, 2006 Capital ratios are estimated, subject to regulatory filings.
Page 7
SUN BANCORP, INC. AND SUBSIDIARIES
UNAUDITED CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION
(Dollars in thousands, except par value)
June 30, December 31,
2006 2005
---- ----
ASSETS
Cash and due from banks $ 78,494 $ 74,387
Interest bearing bank balances 8,961 2,707
Federal funds sold 8,676 8,368
----------- -----------
Cash and cash equivalents 96,131 85,462
Investment securities available for sale (amortized cost -
$514,509; 6/06, $688,073; 12/05) 502,296 676,630
Investment securities held to maturity (estimated fair value - 28,669 32,445
$27,585; 6/06, $31,734; 12/05)
Loans receivable (net of allowance for loan losses -
$24,680; 6/06, $22,463; 12/05) 2,270,596 2,027,753
Restricted equity investments 17,761 19,991
Bank properties and equipment, net 43,279 42,110
Real estate owned, net 669 1,449
Accrued interest receivable 15,659 15,148
Goodwill 128,352 104,891
Intangible assets, net 30,955 29,939
Deferred taxes, net 6,822 6,761
Bank owned life insurance 56,515 55,627
Other assets 12,422 9,683
----------- -----------
TOTAL ASSETS $ 3,210,126 $ 3,107,889
=========== ===========
LIABILITIES
Deposits $ 2,586,034 $ 2,471,648
Advances from the Federal Home Loan Bank 114,163 124,546
Securities sold under agreements to repurchase - FHLB 15,000 60,000
Securities sold under agreements to repurchase - customers 39,864 59,021
Obligations under capital lease 5,352 5,400
Debentures 108,250 77,322
Other liabilities 13,794 14,299
----------- -----------
Total liabilities 2,882,457 2,812,236
SHAREHOLDERS' EQUITY
Preferred stock, $1 par value, 1,000,000 shares authorized, none issued - -
Common stock, $1 par value, shares authorized, 50,000,000
issued, 20,408,659; 6/06, 18,168,530; 12/05 20,409 18,169
Additional paid in capital 303,694 264,152
Retained earnings 11,503 20,757
Accumulated other comprehensive loss (7,937) (7,425)
----------- -----------
Total shareholders' equity 327,669 295,653
----------- -----------
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $ 3,210,126 $ 3,107,889
=========== ===========
Page 8
SUN BANCORP, INC. AND SUBSIDIARIES
UNAUDITED CONSOLIDATED STATEMENTS OF INCOME
(Dollars in thousands, except per share data)
For the Three Months For the Six Months
Ended June 30, Ended June 30,
-------------------- -------------------
2006 2005 2006 2005
---- ---- ---- ----
INTEREST INCOME:
Interest and fees on loans $ 39,714 $ 30,679 $ 76,309 $ 59,755
Interest on taxable investment securities 5,015 6,036 10,592 12,164
Interest on non-taxable investment securities 341 422 597 890
Dividends on restricted equity investments 262 211 576 399
Interest on federal funds sold 232 290 512 330
-------- -------- -------- --------
Total interest income 45,564 37,638 88,586 73,538
-------- -------- -------- --------
INTEREST EXPENSE:
Interest on deposits 15,964 9,883 29,611 18,007
Interest on borrowed funds 2,377 2,428 5,421 4,850
Interest on debentures 2,110 1,248 4,020 2,374
-------- -------- -------- --------
Total interest expense 20,451 13,559 39,052 25,231
-------- -------- -------- --------
Net interest income 25,113 24,079 49,534 48,307
Provision for loan losses 875 765 1,500 1,290
-------- -------- -------- --------
Net interest income after provision for loan losses 24,238 23,314 48,034 47,017
-------- -------- -------- --------
NON-INTEREST INCOME:
Service charges on deposit accounts 2,622 2,300 4,746 4,538
Other service charges 80 70 158 115
(Loss) gain on sale of fixed assets (7) 3 (7) 103
Gain on sale of loans 149 89 433 430
Gain (loss) on sale of investment securities - 809 (20) 809
Other 2,219 1,824 4,149 3,285
-------- -------- -------- --------
Total non-interest income 5,063 5,095 9,459 9,280
NON-INTEREST EXPENSE:
Salaries and employee benefits 12,110 10,859 23,587 21,103
Occupancy expense 2,849 2,648 5,793 5,727
Equipment expense 2,084 1,883 4,011 3,861
Data processing expense 1,103 1,061 2,162 1,992
Amortization of intangible assets 1,193 1,117 2,381 2,264
Other 4,295 3,754 7,973 6,809
-------- -------- -------- --------
Total non-interest expenses 23,634 21,322 45,907 41,756
-------- -------- -------- --------
INCOME BEFORE INCOME TAXES 5,667 7,087 11,586 14,541
INCOME TAXES 1,877 2,257 3,623 4,598
-------- -------- -------- --------
NET INCOME $ 3,790 $ 4,830 $ 7,963 $ 9,943
======== ======== ======== ========
Basic earnings per share (1) $ 0.19 $ 0.25 $ 0.40 $ 0.52
Diluted earnings per share (1) $ 0.18 $ 0.24 $ 0.38 $ 0.49
(1) Data is adjusted for a 5% stock dividend declared in April 2006.
Page 9
SUN BANCORP, INC. AND SUBSIDIARIES
HISTORICAL TRENDS IN QUARTERLY FINANCIAL DATA (unaudited)
(Dollars in thousands, except per share data)
2006 2006 2005 2005 2005
Q2 Q1 Q4 Q3 Q2
-- -- -- -- --
Balance Sheet at quarter end:
Loans:
Commercial and industrial $ 1,898,976 $ 1,846,580 $ 1,732,202 $ 1,674,263 $ 1,657,521
Home equity 206,642 183,363 155,561 137,693 134,057
Second mortgage 77,802 72,344 53,881 45,238 46,955
Residential real estate 27,509 28,846 30,162 28,785 26,500
Installment 84,347 83,497 78,410 75,796 73,500
----------- ----------- ----------- ----------- -----------
Total loans 2,295,276 2,214,630 2,050,216 1,961,775 1,938,533
Allowance for loan losses (24,680) (24,448) (22,463) (22,310) (22,505)
----------- ----------- ----------- ----------- -----------
Net Loans 2,270,596 2,190,182 2,027,753 1,939,465 1,916,028
Goodwill 128,352 128,311 104,891 104,891 104,891
Intangible assets, net 30,955 32,148 29,939 31,057 32,174
Total Assets 3,210,126 3,285,798 3,107,889 3,105,310 3,140,962
Total Deposits 2,586,034 2,603,040 2,471,648 2,507,565 2,541,214
Advances from the Federal Home Loan Bank 114,163 119,382 124,546 129,656 134,713
Federal funds purchased -- -- -- -- --
Securities repurchase agreements - FHLB 15,000 70,000 60,000 -- --
Securities repurchase agreements - customers 39,864 42,236 59,021 86,315 77,488
Total shareholders' equity 327,669 321,355 295,653 291,560 287,632
Quarterly average balance sheet:
Loans:
Commercial and industrial $ 1,868,587 $ 1,811,832 $ 1,680,757 $ 1,672,481 $ 1,649,491
Home equity 194,103 170,523 144,681 134,382 130,754
Second mortgage 75,059 66,426 46,780 46,350 47,846
Residential real estate 28,783 29,472 29,359 27,634 26,728
Installment 86,047 82,450 77,562 74,220 71,477
----------- ----------- ----------- ----------- -----------
Total loans 2,252,579 2,160,703 1,979,139 1,955,067 1,926,296
Securities and other earning assets 657,636 731,744 825,608 899,276 863,176
Total earning assets 2,910,215 2,892,447 2,804,747 2,854,343 2,789,472
Total assets 3,250,205 3,225,820 3,102,434 3,159,051 3,106,121
Non-interest-bearing demand deposits 503,082 496,249 514,783 516,778 487,508
Total deposits 2,599,597 2,533,158 2,510,918 2,556,947 2,461,027
Total interest-bearing liabilities 2,407,521 2,399,663 2,281,743 2,334,909 2,318,221
Total shareholders' equity 325,346 312,428 293,575 292,369 284,654
Capital and credit quality measures:
Total Capital (to Risk-Weighted Assets) (1):
Sun Bancorp, Inc. 11.62% 11.53% 11.11% 11.14% 10.89%
Sun National Bank 10.37% 10.40% 10.50% 10.55% 10.33%
Tier I Capital (to Risk-Weighted Assets) (1):
Sun Bancorp, Inc. 10.65% 10.56% 10.14% 10.15% 9.90%
Sun National Bank 9.40% 9.43% 9.53% 9.57% 9.34%
Leverage Ratio (1):
Sun Bancorp, Inc. 9.10% 8.91% 8.20% 7.84% 7.77%
Sun National Bank 8.03% 8.00% 7.70% 7.41% 7.34%
Average equity to average assets 10.01% 9.69% 9.46% 9.25% 9.16%
ALLL to total loans 1.08% 1.10% 1.10% 1.14% 1.16%
Non-performing assets to total loans
and real estate owned 0.54% 0.59% 0.56% 0.71% 0.73%
Total allowance for loan losses to
non-performing loans 210.06% 214.49% 221.86% 179.60% 176.32%
Other data:
Net (charge-offs) recoveries $ (642) $ 101 $ (368) $ (694) $ (497)
=========== =========== =========== =========== ===========
Non-performing assets:
Non-accrual loans $ 11,447 $ 11,049 $ 9,957 $ 11,848 $ 12,663
Loans past due 90 days and accruing 302 349 168 574 102
Real estate owned, net 669 1,600 1,449 1,437 1,437
----------- ----------- ----------- ----------- -----------
Total non-performing assets $ 12,418 $ 12,998 $ 11,574 $ 13,859 $ 14,202
=========== =========== =========== =========== ===========
(1) June 30, 2006 Capital ratios are estimated, subject to regulatory filings.
Page 10
SUN BANCORP, INC. AND SUBSIDIARIES
HISTORICAL TRENDS IN QUARTERLY FINANCIAL DATA (unaudited)
(Dollars in thousands, except per share data)
2006 2006 2005 2005 2005
Q2 Q1 Q4 Q3 Q2
-- -- -- -- --
Profitability for the quarter:
Tax-equivalent interest income $ 45,746 $ 43,159 $ 40,458 $ 39,483 $ 37,854
Interest expense 20,451 18,601 15,643 14,840 13,559
Tax-equivalent net interest income 25,295 24,558 24,815 24,643 24,295
Tax-equivalent adjustment 182 137 123 127 216
Provision for loan losses 875 625 520 500 765
Non-interest income excluding
security gains, branch sales and
fixed asset sales 5,070 4,416 4,493 4,612 4,283
Security (loss) gain - (20) (36) - 809
(Loss) gain on sale of fixed assets (7) - (58) - 3
Non-interest expense excluding
amortization of intangible assets 22,441 21,085 20,612 20,062 20,205
Amortization of intangible assets 1,193 1,188 1,116 1,117 1,117
Income before income taxes 5,667 5,919 6,843 7,449 7,087
Income tax expense 1,877 1,746 2,259 2,455 2,257
Net Income $ 3,790 $ 4,173 $ 4,584 $ 4,994 $ 4,830
============ ============ ============ ============ ============
Financial ratios:
Return on average assets (1) 0.47% 0.52% 0.59% 0.63% 0.62%
Return on average equity (1) 4.66% 5.34% 6.25% 6.83% 6.79%
Return on average tangible equity (1), (2) 9.17% 10.38% 11.60% 12.83% 13.15%
Net interest margin (1) 3.48% 3.40% 3.54% 3.45% 3.48%
Efficiency ratio 78.32% 77.29% 74.69% 72.71% 73.08%
Per share data:
Earnings per common share (3), (4):
Basic $ 0.19 $ 0.21 $ 0.24 $ 0.26 $ 0.25
Diluted $ 0.18 $ 0.20 $ 0.23 $ 0.25 $ 0.24
Book value (3) $ 16.06 $ 15.98 $ 15.50 $ 15.30 $ 15.10
Tangible book value (3) $ 8.25 $ 8.00 $ 8.43 $ 8.17 $ 7.91
Average basic shares 20,361,974 19,783,965 19,014,830 19,048,105 19,037,677
Average fully diluted shares 21,321,236 21,012,311 20,197,797 20,308,659 20,271,762
Operating non-interest income breakdown:
Service charges on deposit accounts $ 2,622 $ 2,124 $ 2,174 $ 2,245 $ 2,300
Other service charges 80 78 76 88 70
Gain on sale of loans 149 284 241 318 89
Other income 2,219 1,930 2,002 1,961 1,824
------------ ------------ ------------ ------------ ------------
Total operating non-interest income 5,070 4,416 4,493 4,612 4,283
Non-operating income items:
(Loss) gain on sale of investment securities - (20) (36) - 809
(Loss) gain on sale of fixed assets (7) - (58) - 3
------------ ------------ ------------ ------------ ------------
Non-operating income before tax effect (7) (20) (94) - 812
------------ ------------ ------------ ------------ ------------
Total non-interest income $ 5,063 $ 4,396 $ 4,399 $ 4,612 $ 5,095
============ ============ ============ ============ ============
Operating non-interest expense breakdown:
Salaries and employee benefits $ 11,710 $ 11,477 $ 10,823 $ 10,701 $ 10,859
Occupancy expense 2,849 2,944 2,895 2,758 2,648
Equipment expense 2,084 1,927 1,942 1,959 1,883
Data processing expense 1,103 1,059 1,063 1,064 1,061
Amortization of intangible assets 1,193 1,188 1,116 1,117 1,117
Other expenses 4,295 3,678 3,889 3,580 3,754
------------ ------------ ------------ ------------ ------------
Total operating non-interest expense 23,234 22,273 21,728 21,179 21,322
Non-operating expense items:
Severance expense 400 - - - -
------------ ------------ ------------ ------------ ------------
Total non-operating expense items: 400 - - - -
------------ ------------ ------------ ------------ ------------
Total non-interest expense $ 23,634 $ 22,273 $ 21,728 $ 21,179 $ 21,322
============ ============ ============ ============ ============
(1) Annualized.
(2) Return on average tangible equity is computed by dividing annualized net
income for the period by average tangible equity. Average tangible equity
equals average equity less average identifiable intangible assets and
goodwill.
(3) Data is adjusted for a 5% stock dividend declared in April 2006.
(4) Earnings per share is computed by dividing net income by the weighted
average number of shares of common stock outstanding.
Page 11
SUN BANCORP, INC. AND SUBSIDIARIES
AVERAGE BALANCE SHEET
(Dollars in thousands)
Three months ended June 30, Three months ended June 30,
------------------------------------- ------------------------------------
2006 2005
------------------------------------- ------------------------------------
Average Average Average Average
Balance Interest Yield/Cost Balance Interest Yield/Cost
------- -------- ---------- ------- -------- ----------
Interest-earning assets:
Loans receivable (1), (2)
Commercial and industrial $1,868,587 $ 33,000 7.06 % $1,649,491 $26,278 6.37 %
Home equity 194,103 3,176 6.54 130,754 1,753 5.36
Second mortgage 75,059 1,168 6.22 47,846 760 6.35
Residential real estate 28,783 588 8.17 26,728 558 8.35
Other 86,047 1,782 8.28 71,477 1,330 7.44
---------- ------- ---------- -------
Total loans receivable 2,252,579 39,714 7.05 1,926,296 30,679 6.37
Investment securities (3) 627,863 5,671 3.61 817,461 6,843 3.35
Interest-bearing deposit with banks 10,970 129 4.70 6,627 42 2.54
Federal funds sold 18,803 232 4.94 39,088 290 2.97
---------- ------- ---------- -------
Total interest-earning assets 2,910,215 45,746 6.29 2,789,472 37,854 5.43
Cash and due from banks 79,224 88,877
Bank properties and equipment 43,610 37,177
Goodwill and intangibles 160,002 137,712
Other assets 57,154 52,883
---------- ----------
Non-interest-earning assets 339,990 316,649
---------- ----------
Total assets $3,250,205 $3,106,121
========== ==========
Interest-bearing liabilities:
Interest-bearing deposit accounts:
Interest-bearing demand deposit $ 863,264 5,891 2.73 % $ 858,076 3,639 1.70 %
Savings deposits 343,974 1,284 1.49 427,971 1,253 1.17
Time deposits 889,277 8,789 3.95 687,472 4,991 2.90
---------- ------- ---------- -------
Total interest-bearing deposit accounts 2,096,515 15,964 3.05 1,973,519 9,883 2.00
---------- ------- ---------- -------
Borrowed money
Repurchase agreements with customers 39,671 422 4.25 73,122 421 2.30
FHLB Advances 149,761 1,748 4.67 191,722 1,987 4.15
Federal funds purchased 7,967 109 5.47 2,536 20 3.15
Debentures 108,250 2,110 7.80 77,322 1,248 6.46
Obligations under capital lease 5,357 98 7.32 - - -
---------- ------- ---------- -------
Total borrowings 311,006 4,487 5.77 344,702 3,676 4.27
Total interest-bearing liabilities 2,407,521 20,451 3.40 2,318,221 13,559 2.34
---------- ------- ---------- -------
Non-interest-bearing demand deposits 503,082 487,508
Other liabilities 14,258 15,738
---------- ----------
Total liabilities 2,924,861 2,821,467
Shareholders' equity 325,346 284,654
---------- ----------
Total liabilities and stockholders' equity $3,250,207 $3,106,121
========== ==========
Net interest income $25,295 $24,295
======= =======
Interest rate spread (4) 2.89 % 3.09 %
====== ======
Net interest margin (5) 3.48 % 3.48 %
====== ======
Ratio of average interest-earning assets
to average interest-bearing liabilities 120.88 % 120.33 %
====== ======
- -------------------------------------------------------------------------------------------------------------------
(1) Average balances include non-accrual loans.
(2) Loan fees are included in interest income and the amount is not material
for this analysis.
(3) Interest earned on non-taxable investment securities is shown on a tax
equivalent basis assuming a 35% marginal federal tax rate for all periods.
(4) Interest rate spread represents the difference between the average yield on
interest-earning assets and the average cost of interest-bearing
liabilities.
(5) Net interest margin represents net interest income as a percentage of
average interest-earning assets.
Page 12
SUN BANCORP, INC. AND SUBSIDIARIES
AVERAGE BALANCE SHEET
(Dollars in thousands)
Six months ended June 30, Six months ended June 30,
--------------------------------- -----------------------------------
2006 2005
--------------------------------- -----------------------------------
Average Average Average Average
Balance Interest Yield/Cost Balance Interest Yield/Cost
------- -------- ---------- ------- -------- ----------
Interest-earning assets:
Loans receivable (1), (2)
Commercial and industrial $1,840,366 $ 63,594 6.91 % $1,633,501 $ 51,413 6.29 %
Home equity 182,378 5,919 6.49 128,425 3,252 5.06
Second mortgage 70,766 2,167 6.12 48,524 1,516 6.25
Residential real estate 29,126 1,210 8.31 26,486 1,033 7.80
Other 84,259 3,419 8.12 69,552 2,541 7.31
---------- ------- ---------- -------
Total loans receivable 2,206,895 76,309 6.92 1,906,488 59,755 6.27
Investment securities (3) 660,568 11,798 3.57 836,300 13,838 3.31
Interest-bearing deposit with banks 11,667 274 4.70 6,528 73 2.24
Federal funds sold 22,250 512 4.60 22,966 330 2.87
---------- ------- ---------- -------
Total interest-earning assets 2,901,380 88,893 6.13 2,772,282 73,996 5.34
Cash and due from banks 79,658 83,717
Bank properties and equipment 43,460 36,985
Goodwill and intangibles 155,863 136,259
Other assets 57,718 53,271
---------- ----------
Non-interest-earning assets 336,699 310,232
---------- ----------
Total assets $3,238,079 $3,082,514
========== ==========
Interest-bearing liabilities:
Interest-bearing deposit accounts:
Interest-bearing demand deposit $ 872,853 11,236 2.57 % $ 831,324 6,347 1.53 %
Savings deposits 358,286 2,650 1.48 435,239 2,374 1.09
Time deposits 835,738 15,725 3.76 670,437 9,286 2.77
---------- ------- ---------- -------
Total interest-bearing deposit accounts 2,066,877 29,611 2.87 1,937,000 18,007 1.86
---------- ------- ---------- -------
Borrowed money
Repurchase agreements with customers 40,938 828 4.05 71,467 741 2.07
FHLB Advances 178,670 4,104 4.59 205,350 4,020 3.92
Federal funds purchased 6,235 162 5.20 6,042 89 2.94
Debentures 105,516 4,020 7.62 77,322 2,374 6.14
Obligations under capital lease 5,378 327 7.30 - - -
---------- ------- ---------- -------
Total borrowings 336,737 9,441 5.61 360,181 7,224 4.01
Total interest-bearing liabilities 2,403,614 39,052 3.25 2,297,181 25,231 2.20
---------- ------- ---------- -------
Non-interest-bearing demand deposits 499,684 487,711
Other liabilities 15,860 14,533
----------- ----------
Total liabilities 2,919,158 2,799,425
Shareholders' equity 318,922 283,089
----------- ----------
Total liabilities and stockholders' equity $ 3,238,080 $3,082,514
=========== ==========
Net interest income $49,841 $ 48,765
======= ========
Interest rate spread (4) 2.88 % 3.14 %
====== ======
Net interest margin (5) 3.44 % 3.52 %
====== ======
Ratio of average interest-earning assets
to average interest-bearing liabilities 120.71 % 120.68 %
====== ======
- -------------------------------------------------------------------------------------------------------------------------
(1) Average balances include non-accrual loans.
(2) Loan fees are included in interest income and the amount is not material
for this analysis.
(3) Interest earned on non-taxable investment securities is shown on a tax
equivalent basis assuming a 35% marginal federal tax rate for all periods.
(4) Interest rate spread represents the difference between the average yield on
interest-earning assets and the average cost of interest-bearing
liabilities.
(5) Net interest margin represents net interest income as a percentage of
average interest-earning assets.