Le Lézard
Classified in: Business
Subjects: ERN, DIV

Sun Bancorp, Inc. Announces Third Quarter Net Income of $2.7 Million, or $0.14 per Diluted Share; Board of Directors Declares Quarterly Dividend of $0.01


MOUNT LAUREL, N.J., Oct. 26, 2017 /PRNewswire/ --

Sun Bancorp Logo (PRNewsFoto/Sun Bancorp, Inc.)

Third Quarter Highlights:

Sun Bancorp, Inc. (NASDAQ: SNBC), (the "Company"), the holding company for Sun National Bank (the "Bank"), today reported net income of $2.7 million, or $0.14 per diluted share, for the quarter ended September 30, 2017, compared to net income of $1.5 million, or $0.08 per diluted share, for the quarter ended June 30, 2017, and net income of $1.6 million, or $0.09 per diluted share, for the quarter ended September 30, 2016.

"Our successful efforts in the last three years towards strengthening capital, building profitability and controlling expenses continue to produce financial results of better quality and quantity. Several of our financial ratios are now at or well above peer levels," stated President & CEO Thomas M. O'Brien.  "Entering 2017, the Company stated that it would continue to focus on improving net interest margin, the efficiency ratio and return on assets, and the third quarter demonstrated significant milestone achievements towards those goals.  Despite slowdowns in new business development, the underlying health and strength of the Company is further evidenced by the significant increase in our diluted earnings per share from $0.08 to $0.14."  

Discussion of Results:

Balance Sheet

Total assets decreased to $2.17 billion at September 30, 2017, as compared to $2.22 billion at June 30, 2017 and $2.26 billion at December 31, 2016. Cash and cash equivalents totaled $93.5 million at September 30, 2017, as compared to $127.8 million at June 30, 2017 and $134.2 million at December 31, 2016.  The decrease in cash and cash equivalents during the first nine months of 2017 was primarily due to a reduction in brokered and subscription deposits and the recent redemptions of approximately $40 million of trust preferred securities, partially offset by decreases in net loans receivable and investment securities since December 31, 2016.

Investment securities decreased by $11.6 million to $288.4 million at September 30, 2017 from $300.0 million at June 30, 2017 due to pay downs.  The Bank did not initiate new investment purchases in the current quarter as available cash flow was reinvested into commercial loans.

Net loans totaled $1.57 billion at each of September 30, 2017 and June 30, 2017 as compared to $1.59 billion at December 31, 2016.  The decrease of $19.9 million since year end was due to several factors.  As a result of the reduction in originations and refinancing activity, non-owner occupied commercial real estate ("CRE") loans fell by $29.0 million in the nine months ended September 30, 2017.  Residential and home equity loans declined by $37.7 million over the same period as the Bank's position in these portfolios continued to decline with no origination activity.  Offsetting these decreases was growth in the commercial and industrial (C&I) lending segment, which includes owner-occupied CRE loans and C&I loans, of $33.2 million and an increase in land and development loans of $12.6 million in the nine months ended September 30, 2017.

"In the past two quarters, we believe several of the Bank's non-owner occupied CRE clients have scaled back on activity, due to potential U.S. tax reform legislative proposals that may have a material impact on the economics of real estate investments," stated O'Brien.  "As projected, our C&I activity remained robust as the Bank continues to evaluate attractive relationship lending opportunities in this segment."

Total deposits decreased to $1.68 billion at September 30, 2017, as compared to $1.71 billion at June 30, 2017 and $1.74 billion at December 31, 2016 due primarily to a $66 million, or 68%, runoff in brokered and subscription deposits since year-end 2016.  The cost of deposits decreased by one basis point to 39 basis points compared to the prior linked quarter and increased by five basis points as compared to the nine months ended September 30, 2016.

"The Bank's slower loan originations as well as our liquidity position affords us the opportunity to continue to shed non-relationship brokered and subscription deposits and better focus on fee-generating relationship deposits," stated O'Brien.  "As a result, we saw a small decrease in overall cost of deposits despite the increasing external competitive rate environment."

Net Interest Income and Margin

Net interest income was $16.0 million for the three months ended September 30, 2017, compared to $14.9 million for the three months ended June 30, 2017, and $14.7 million for the three months ended September 30, 2016. The Company's net interest margin was 3.25% for the three months ended September 30, 2017 as compared to 2.96% for three months ended June 30, 2017 and 2.94% for the three months ended September 30, 2016.  The increase in net interest margin in the third quarter of 2017 primarily reflects an increase in loan yields of 16 basis points from the linked prior quarter and the impact of the recent trust preferred redemptions while deposit cost of funds fell by one basis point.  During the second quarter, the Bank accelerated $415 thousand of deferred issuance costs related to two tranches of trust preferred securities, totaling $40 million, which were fully redeemed during June and July of 2017.  This acceleration of costs reduced net interest margin by nine basis points in the second quarter of 2017. 

"Coming into 2017, the Company had stated that its net interest margin target would be between 3.00% and 3.10%," said O'Brien.  "In 2017, we effectively de-leveraged our balance sheet in order to redeem approximately $40 million of our trust preferred securities.  Coupled with the improved yield on our loan portfolio and stable deposit costs, the Company was able to expand its margin by 29 basis points to 3.25% for the third quarter of 2017 compared to the prior year quarter, which is now in line with peer levels.  Over the last three years, the Company has been mindful of the asset-sensitive nature of its balance sheet, which we believe has positioned us well in a rising rate environment."

Non-Interest Income

Non-interest income was $2.8 million for the quarter ended September 30, 2017, as compared to $3.0 million and $3.1 million for the quarters ended June 30, 2017 and September 30, 2016, respectively.  The decrease in non-interest income from the quarter ended June 30, 2017 reflects declines in both deposit related fees and investment products income resulting from mild reductions in fee paying customers..

Non-Interest Expense

Non-interest expense for the third quarter of 2017 was $14.5 million as compared to $16.3 million for the three months ended June 30, 2017 and $15.9 million for the three months ended September 30, 2016.  The decrease in non-interest expense from the prior linked quarter is due primarily to decreases of $1.0 million in other expenses and $491 thousand in professional fees.  Other expenses included $588 thousand of recourse reserve reversals in the third quarter of 2017 and $166 thousand of lower appraisal fees compared to the linked prior quarter.  Professional fees declined primarily due to the linked prior quarter including $400 thousand of merger related expenses.  Non-interest expense for the third quarter of 2017 declined by $1.4 million compared to the third quarter of 2016, primarily due to the aforementioned recourse reserve reversals, a decrease of $233 thousand in equipment expense, a decrease of $132 thousand in occupancy expense, a decrease of $124 thousand in data processing expense, a $106 thousand decline in advertising expense and a $105 thousand decrease in professional fees.

"With our quarterly non-interest expenses now falling below $15 million, we continue to demonstrate our careful attention to cost management principles," said O'Brien.  "Rationalization of occupancy costs, reduction of expenses as a result of diligent risk management, information technology platform enhancements and strong vendor management are all contributing factors that have allowed the Company to improve its operating efficiency.  At the beginning of 2017, we stated that improving the efficiency ratio would be a key objective.  Our efforts have led to a significant improvement in that metric.  The Company's efficiency ratio, which had hovered above 90% in recent quarters, improved to 77% this quarter."

Asset Quality

Non-performing loans decreased by $228 thousand to $4.2 million, or 0.26% of gross loans, at September 30, 2017 from $4.4 million, or 0.28% of gross loans, at June 30, 2017. During the third quarter of 2017, approximately $1.0 million of non-performing residential mortgage loans were sold.  This was offset by an increase in non-performing residential mortgage and commercial real estate loans of approximately $500 thousand and $300 thousand, respectively. Non-performing loans were $6.8 million, or 0.42% of gross loans, at September 30, 2016.

There was no provision for loan losses recorded in the three months ended September 30, 2017, June 30, 2017 and September 30, 2016.  The Bank's credit portfolio has remained relatively steady with minimal charge-off activity.  While net charge-offs for the third quarter of 2017 were $250 thousand, in the first nine months of 2017 the Bank recorded net charge-offs of $16 thousand as compared to net charge-offs of $499 thousand in the first nine months of 2016.  The allowance for loan losses was $14.7 million, or 0.92% of gross loans, at September 30, 2017 as compared to $14.9 million, or 0.94% of gross loans, at June 30, 2017 and $15.8 million, or 1.01% of gross loans, at September 30, 2016.  The allowance for loan losses was 349% of non-performing loans at September 30, 2017 as compared to 337% of non-performing loans at June 30, 2017 and 238% of non-performing loans at September 30, 2016.

Capital

The Company's capital ratios continue to remain very strong due to positive earnings and a slightly reduced balance sheet.  All capital ratios remain at robust levels and are sufficient to support the Company's strategic plan.  At September 30, 2017, the Bank had a Tier 1 common equity risk-based capital ratio of 18.7%, total risk-based capital ratio of 19.6%, a Tier 1 risk-based capital ratio of 18.7% and a leverage capital ratio of 14.2%. At September 30, 2017, 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 16.5%, 20.2%, 19.2%, and 14.6%, respectively.  The Company's tangible equity to tangible assets ratio was 13.6% at September 30, 2017, as compared to 13.2% at June 30, 2017 and 10.6% at September 30, 2016. 

Merger Update

On October 24, 2017, the Sun Bancorp, Inc. shareholders approved the previously announced merger of the Company with and into OceanFirst Financial Corp. (NASDAQ: OCFC) ("OceanFirst") with OceanFirst as the surviving entity (the "Merger").  Regulatory approval of the Merger was received from the Federal Reserve Bank of Philadelphia on October 17, 2017.  The regulatory application for the transaction remains under review by the Office of the Comptroller of the Currency ("OCC").  Subject to receipt of OCC approval and other customary closing conditions, the Company expects to close the Merger in January 2018.

Dividend Declaration

On October 24, 2017, the Board of Directors of the Company declared a dividend of $0.01 per share to holders of record of the common stock of the Company as of November 21, 2017, payable on December 5, 2017.

"Our primary goal of delivering shareholder value remains steadfast," stated O'Brien.  "The accomplishments of this quarter and the merger announcement of the previous quarter, further demonstrate that commitment.  We believe our Company has made tremendous progress in the last three years towards building profitability, pristine asset quality and a culture of regulatory excellence and delivering upon the promise of solid relationship banking.  The additional progress we have achieved in the third quarter is a culmination of those efforts, and represents an impressive legacy for Sun and all of its various stakeholders." 

About Sun Bancorp, Inc.

Sun Bancorp, Inc. (NASDAQ: SNBC) is a $2.17 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, and the metro New York region. Sun National Bank is an Equal Housing Lender and its deposits are insured up to the legal maximum by the FDIC. For more information about Sun National Bank and Sun Bancorp, Inc., visit www.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 the Company and 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) delays in closing the Merger and the ability of the Company or OceanFirst to obtain regulatory approvals and meet other closing conditions to the Merger; (ii) the Company's ability to attract and retain key management and staff; (iii) changes in business strategy or an inability to successfully execute strategy due to the occurrence of unanticipated events; (iv) the ability to attract deposits and other sources of liquidity; (v) changes in the financial performance and/or condition of the Bank's borrowers; (vi) changes in consumer spending, borrowing and saving habits; (vii) the ability to increase market share and control expenses; (viii) changes in estimates of future loan loss reserve requirements based upon the periodic review thereof under relevant regulatory and accounting requirements; (ix) local, regional and national economic conditions and events and the impact they may have on the Company and its customers; (x) volatility in the credit and equity markets and its effect on the general economy; (xi) 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; (xiii) inflation, interest rate, securities market and monetary fluctuations; (xiv)legislative and regulatory changes, including the Dodd-Frank Wall Street Reform and Consumer Protection Act and the implementing 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; (xv) 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; (xvi) competition among providers of financial services; and (xvii) 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, 2016 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 September 30, 2017, June 30, 2017, March 31, 2017, December 31, 2016 and September 30, 2016.



September 30,

2017



June 30,

2017



March 31,

2017



December 31,

2016



September 30,

2016


Tangible book value per common share:





















Shareholders' equity


$

328,599



$

325,060



$

322,816



$

319,709



$

265,878


Less: Intangible assets



38,188




38,188




38,188




38,188




38,188


Tangible equity


$

290,411



$

286,872



$

284,628



$

281,521



$

227,690


Common stock



19,135




19,134




19,132




19,031




19,026


Less: Treasury stock



73




73




75




108




138


Total outstanding shares



19,062




19,061




19,057




18,923




18,888


Tangible book value per common share:


$

15.24



$

15.05



$

14.94



$

14.88



$

12.05


Return on Average Tangible Equity (dollars in thousands)

The following provides the calculation of return on tangible equity for the three months ended September 30, 2017, June 30, 2017, March 31, 2017, December 31, 2016 and September 30, 2016.



Three Months Ended




September 30,

2017



June 30,

2017



March 31,

2017



December 31,

2016



September 30,

2016


Net income


$

2,740



$

1,455



$

1,430



$

56,000



$

1,630


Average tangible equity:





















Average shareholders' equity


$

328,994



$

325,919



$

323,258



$

267,542



$

266,931


Less: Average intangible assets



38,188




38,188




38,188




38,188




38,188


Average tangible equity


$

290,806



$

287,731



$

285,070



$

229,354



$

228,743


Return on average tangible equity(1):



3.8

%



2.0

%



2.0

%



97.7

%



2.9

%



(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




September 30,



September 30,




2017



2016



2017



2016


Profitability for the period:

















Net interest income


$

16,034



$

14,712



$

45,670



$

44,070


(Recovery of) provision for loan losses



?




?




(831)




(1,682)


Non-interest income



2,835




3,142




9,266




10,078


Non-interest expense



14,509




15,937




46,860




49,527


Income before income taxes



4,360




1,917




8,907




6,303


Income tax expense



1,620




287




3,282




885


Net income available to common shareholders


$

2,740



$

1,630



$

5,625



$

5,418


Financial ratios:

















Return on average assets (1)



0.5

%



0.3

%



0.5

%



0.3

%

Return on average equity (1)



3.3

%



2.4

%



3.5

%



2.8

%

Return on average tangible equity (1), (2)



3.9

%



2.9

%



3.9

%



3.2

%

Net interest margin (1)



3.25

%



2.94

%



3.04

%



2.94

%

Efficiency ratio



77

%



89

%



85

%



91

%

Income per common share:

















Basic


$

0.14



$

0.09



$

0.30



$

0.29


Diluted


$

0.14



$

0.09



$

0.29



$

0.29



















Average equity to average assets



15.0

%



12.2

%



14.7

%



12.1

%




















September 30,



December 31,








2017



2016




2016






At period-end:

















Total assets


$

2,167,674



$

2,189,346



$

2,262,262






Total deposits



1,682,494




1,717,634




1,741,363






Loans receivable, net of allowance for loan losses



1,574,498




1,550,839




1,594,377






Loans held-for-sale



?




1,450




?






Investments



288,428




308,031




311,727






Borrowings



91,236




91,861




91,708






Junior subordinated debentures



51,548




92,786




92,786






Shareholders' equity



328,599




265,878




319,709























Credit quality and capital ratios (3):

















Allowance for loan losses to gross loans held-for-investment



0.92

%



1.01

%



0.97

%





Non-performing loans held-for-investment to gross loans held-for-investment



0.26

%



0.42

%



0.19

%





Non-performing assets to total assets



0.19

%



0.31

%



0.14

%





Allowance for loan losses to non-performing loans held-for-investment



349

%



238

%



501

%





Tier 1 common equity risk-based capital:

















Sun Bancorp, Inc.



16.5

%



14.5

%



16.0

%





Sun National Bank



18.7

%



18.3

%



18.9

%





Total risk-based capital:

















Sun Bancorp, Inc.



20.2

%



21.2

%



21.6

%





Sun National Bank



19.6

%



19.3

%



19.8

%





Tier 1 risk-based capital:

















Sun Bancorp, Inc.



19.2

%



18.1

%



18.9

%





Sun National Bank



18.7

%



18.3

%



18.9

%





Leverage capital:

















Sun Bancorp, Inc.



14.6

%



13.3

%



14.6

%





Sun National Bank



14.2

%



13.4

%



14.5

%






















Book value per common share


$

17.25



$

14.08



$

16.94






Tangible book value per common share


$

15.24



$

12.05



$

14.94








(1)

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)

September 30, 2017 capital ratios are estimated, subject to regulatory filings.


  

 

SUN BANCORP, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION (Unaudited)

(Dollars in thousands, except share and per share amounts)




September 30,



December 31,




2017



2016


ASSETS









Cash and due from banks


$

20,180



$

19,645


Interest earning bank balances



73,278




114,563


Cash and cash equivalents



93,458




134,208


Restricted cash



1,000




5,000


Investment securities available for sale (amortized cost of $274,374 and $300,028 at September 30, 2017 and December 31, 2016, respectively)



271,334




295,686


Investment securities held to maturity (estimated fair value of $250 at September 30, 2017 and December 31, 2016)



250




250


Loans receivable (net of allowance for loan losses of $14,694 and $15,541 at September 30, 2017 and December 31, 2016, respectively)



1,574,498




1,594,377


Restricted equity investments, at cost



16,844




15,791


Bank properties and equipment, net



28,225




30,148


Accrued interest receivable



5,161




5,122


Goodwill



38,188




38,188


Bank owned life insurance (BOLI)



84,572




83,109


Deferred taxes, net



47,872




51,573


Other assets



6,272




8,810


Total assets


$

2,167,674



$

2,262,262


LIABILITIES AND SHAREHOLDERS' EQUITY









Liabilities:









Deposits


$

1,682,494



$

1,741,363


Advances from the Federal Home Loan Bank of New York (FHLBNY)



85,266




85,416


Obligations under capital lease



5,970




6,292


Junior subordinated debentures



51,548




92,786


Other liabilities



13,797




16,696


Total liabilities



1,839,075




1,942,553











Commitments and contingencies


















Shareholders' equity:









Preferred stock, $1 par value, 1,000,000 shares authorized; none issued



?




?


Common stock, $5 par value, 40,000,000 shares authorized; 19,134,685 shares issued and 19,092,748 shares outstanding at September 30, 2017; 19,030,704 shares issued and 18,922,726 shares outstanding at December 31, 2016.



95,673




95,154


Additional paid-in capital



508,869




508,593


Retained deficit



(271,448)




(276,501)


Accumulated other comprehensive loss



(1,798)




(2,568)


Deferred compensation plan trust



(1,276)




(1,160)


Treasury stock at cost, 41,937 shares at September 30, 2017 and 107,978 shares at December 31, 2016.



(1,421)




(3,809)


Total shareholders' equity



328,599




319,709


Total liabilities and shareholders' equity


$

2,167,674



$

2,262,262



 

 

SUN BANCORP, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF OPERATIONS (Unaudited)

(Dollars in thousands, except share and per share amounts)










For the Three Months Ended



For the Nine Months Ended




September 30,



September 30,




2017



2016



2017



2016


INTEREST INCOME:

















Interest and fees on loans


$

16,659



$

15,582



$

48,557



$

46,278


Interest on taxable investment securities



1,737




1,657




5,319




4,956


Dividends on restricted equity investments



247




220




715




657


Total interest income



18,643




17,459




54,591




51,891


INTEREST EXPENSE:

















Interest on deposits



1,659




1,556




5,038




4,304


Interest on funds borrowed



537




545




1,602




1,631


Interest on junior subordinated debentures



413




646




2,281




1,886


Total interest expense



2,609




2,747




8,921




7,821


Net interest income



16,034




14,712




45,670




44,070


(RECOVERY OF) PROVISION FOR LOAN LOSSES



?




?




(831)




(1,682)


Net interest income after provision for loan losses



16,034




14,712




46,501




45,752


NON-INTEREST INCOME:

















Deposit service charges and fees



1,350




1,540




4,119




4,737


Interchange fees



483




451




1,460




1,422


Gain on sale of loans



?




41




?




41


Gain on sale of investment securities



?




?




30




426


Investment products income



293




505




905




1,419


BOLI income



491




485




1,463




1,482


Other income



218




120




1,289




551


Total non-interest income



2,835




3,142




9,266




10,078


NON-INTEREST EXPENSE:

















Salaries and employee benefits



8,821




8,649




26,669




27,045


Occupancy expense



2,141




2,273




6,742




6,756


Equipment expense



1,070




1,303




3,369




3,462


Data processing expense



992




1,116




2,923




3,379


Professional fees



625




730




2,277




1,738


Insurance expense



389




452




1,192




1,796


Advertising expense



306




412




964




1,187


Problem loan expense



75




131




279




350


Other expense



90




871




2,445




3,814


Total non-interest expense



14,509




15,937




46,860




49,527


INCOME BEFORE INCOME TAXES



4,360




1,917




8,907




6,303


INCOME TAX EXPENSE



1,620




287




3,282




885


NET INCOME AVAILABLE TO COMMON

   SHAREHOLDERS


$

2,740



$

1,630



$

5,625



$

5,418



















Basic earnings per share


$

0.14



$

0.09



$

0.30



$

0.29


Diluted earnings per share


$

0.14



$

0.09



$

0.29



$

0.29



















Weighted average shares - basic



19,088,192




18,874,577




19,044,985




18,821,047


Weighted average shares - diluted



19,188,490




18,962,740




19,162,414




18,909,867


 

 

 


 

SUN BANCORP, INC. AND SUBSIDIARIES

HISTORICAL TRENDS IN QUARTERLY FINANCIAL DATA (Unaudited)

(dollars in thousands)




2017



2017



2016



2016



2016





Q3



Q2



Q1



Q4



Q3



Profitability for the quarter:






















Net interest income


$

16,034



$

14,863



$

14,772



$

14,834



$

14,712



(Recovery of) provision for loan losses



?




(831)




?




?




?



Non-interest income



2,835




3,000




3,431




3,311




3,142



Non-interest expense



14,509




16,289




16,062




15,425




15,937



Income before income taxes



4,360




2,405




2,141




2,720




1,917



Income tax expense (benefit)



1,620




950




711




(53,280)




287



Net income available to common shareholders


$

2,740



$

1,455



$

1,430



$

56,000



$

1,630



Financial ratios:






















Return on average assets (1)



0.5

%



0.3

%



0.3

%



10.2

%



0.3

%


Return on average equity (1)



3.3

%



1.8

%



1.8

%



83.7

%



2.4

%


Return on average tangible equity (1), (2)



3.9

%



2.0

%



2.0

%



97.7

%



2.9

%


Net interest margin (1)



3.25

%



2.96

%



2.93

%



2.93

%



2.94

%


Efficiency ratio



77

%



91

%



88

%



85

%



89

%


Per share data :






















Income per common share:






















Basic


$

0.14



$

0.08



$

0.08



$

2.96



$

0.09



Diluted


$

0.14



$

0.08



$

0.07



$

2.94



$

0.09



Book value


$

17.25



$

17.05



$

16.94



$

16.90



$

14.08



Tangible book value


$

15.24



$

15.05



$

14.94



$

14.88



$

12.05



Cash dividends paid


$

0.01



$

0.01



$

0.01



$

0.01



$

0.01



Average basic shares



19,088,192




19,059,626




18,986,015




18,908,688




18,874,577



Average diluted shares



19,188,490




19,191,294




19,107,226




19,016,188




18,962,740



Non-interest income:






















Deposit service charges and fees


$

1,350



$

1,367



$

1,402



$

1,484



$

1,540



Interchange fees



483




510




467




483




451



Gain on sale of investment securities



?




26




?




?




?



Gain on sale of loans



?




?




?




60




41



Investment products income



293




327




284




288




505



BOLI income



491




488




484




452




485



Other income



218




282




794




544




120



Total non-interest income


$

2,835



$

3,000



$

3,431



$

3,311



$

3,142



Non-interest expense:






















Salaries and employee benefits


$

8,821



$

8,966



$

8,882



$

7,926



$

8,649



Occupancy expense



2,141




2,252




2,350




2,232




2,273



Equipment expense



1,070




1,142




1,157




1,324




1,303



Data processing expense



992




911




1,019




1,124




1,116



Professional fees



625




1,116




536




508




730



Insurance expense



389




408




395




368




452



Advertising expense



306




346




313




473




412



Problem loan expenses



75




70




134




61




131



Other expenses



90




1,078




1,276




1,409




871



Total non-interest expense


$

14,509



$

16,289



$

16,062



$

15,425



$

15,937





(1)

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.

 

 

SUN BANCORP, INC. AND SUBSIDIARIES

HISTORICAL TRENDS IN QUARTERLY FINANCIAL DATA (Unaudited)

(dollars in thousands)




2017



2017



2017



2016



2016




Q3



Q2



Q1



Q4



Q3


Balance Sheet at quarter end:





















Cash and cash equivalents


$

93,458



$

127,831



$

128,892



$

134,208



$

156,292


Restricted cash



1,000




1,000




1,000




5,000




5,000


Investment securities



288,428




299,987




315,558




311,727




308,031


Loans held-for-investment





















Commercial and industrial



258,360




251,346




230,306




235,946




226,493


Commercial real estate - owner occupied



242,178




250,164




261,971




231,348




226,165


Commercial real estate - non-owner occupied



713,624




710,831




729,102




742,662




676,323


Land and development



79,957




67,042




67,336




67,165




84,692


Residential real estate



187,338




196,157




205,573




210,874




226,691


Home equity and other



107,735




113,572




116,187




121,923




126,302


Total loans



1,589,192




1,589,112




1,610,475




1,609,918




1,566,666


Allowance for loan losses



(14,694)




(14,945)




(15,716)




(15,541)




(15,827)


Net loans held-for-investment



1,574,498




1,574,167




1,594,759




1,594,377




1,550,839


Loans held-for-sale



?




?




?




?




1,450


Goodwill



38,188




38,188




38,188




38,188




38,188


Total assets



2,167,674




2,216,802




2,255,773




2,262,262




2,189,346


Net deferred tax asset, before valuation allowance



121,058




123,107




125,238




124,574




125,051


Deferred tax valuation allowance



(73,186)




(73,665)




(73,665)




(127,973)




(128,362)


Total deposits



1,682,494




1,708,253




1,733,989




1,741,363




1,717,634


Advances from the FHLBNY



85,266




85,317




85,367




85,416




85,465


Obligations under capital leases



5,970




6,079




6,187




6,292




6,396


Junior subordinated debentures



51,548




77,322




92,786




92,786




92,786


Total shareholders' equity



328,599




325,060




322,816




319,709




265,878























Quarterly average balance sheet:





















Loans held-for-investment





















Commercial


$

1,281,922



$

1,288,517



$

1,270,543



$

1,238,749



$

1,215,135


Residential real estate



193,663




202,659




209,500




220,502




233,277


Home equity and other



109,842




114,330




117,963




122,290




128,078


Total loans



1,585,427




1,605,506




1,598,006




1,581,541




1,576,490


Securities and other interest-earning assets



387,243




405,240




417,171




442,409




425,042


Total interest-earning assets



1,972,670




2,010,746




2,015,177




2,023,950




2,001,532


Total assets



2,191,588




2,231,978




2,240,787




2,201,886




2,187,482


Non-interest-bearing demand deposits



414,554




409,694




402,949




411,728




402,465


Total deposits



1,700,655




1,707,873




1,717,848




1,731,312




1,709,863


Total interest-bearing liabilities



1,435,395




1,482,256




1,499,303




1,504,138




1,492,139


Total shareholders' equity



328,994




325,919




323,258




267,542




266,931


 


SUN BANCORP, INC. AND SUBSIDIARIES

HISTORICAL TRENDS IN QUARTERLY FINANCIAL DATA (Unaudited)

(dollars in thousands)




2017



2017



2017



2016



2016




Q3



Q2



Q1



Q4



Q3























Capital and credit quality measures:





















Tier 1 common equity risk-based capital (1):





















Sun Bancorp, Inc.



16.5

%



16.2

%



15.8

%



16.0

%



14.5

%

Sun National Bank



18.7

%



18.3

%



17.8

%



18.9

%



18.3

%

Total risk-based capital:





















Sun Bancorp, Inc.



20.2

%



21.4

%



21.9

%



21.6

%



21.2

%

Sun National Bank



19.6

%



19.3

%



18.8

%



19.8

%



19.3

%

Tier 1 risk-based capital:





















Sun Bancorp, Inc.



19.2

%



19.7

%



19.2

%



18.9

%



18.1

%

Sun National Bank



18.7

%



18.3

%



17.8

%



18.9

%



18.3

%

Leverage capital:





















Sun Bancorp, Inc.



14.6

%



14.7

%



14.5

%



14.6

%



13.3

%

Sun National Bank



14.2

%



13.6

%



13.4

%



14.5

%



13.4

%











































Average equity to average assets



15.0

%



14.6

%



14.4

%



12.2

%



12.2

%

Allowance for loan losses to gross loans held-for-investment



0.92

%



0.94

%



0.98

%



0.97

%



1.01

%

Non-performing loans held-for-investment to gross loans held-for-investment



0.26

%



0.28

%



0.25

%



0.19

%



0.42

%

Non-performing assets to total assets



0.19

%



0.20

%



0.18

%



0.14

%



0.31

%

Allowance for loan losses to non-performing loans held-for-investment



349

%



337

%



385

%



501

%



238

%

Other data:





















Net (charge-offs) recoveries



(250)




59




175




(285)




(65)


Classified loans



7,350




7,979




7,752




6,887




8,593


Classified assets



10,556




11,185




10,958




10,094




11,799


Non-performing assets:





















Non-accrual loans



2,727




2,934




2,682




1,697




3,246


Non-accrual loans held-for-sale



?




?




?




?




178


Troubled debt restructurings, non-accrual



1,481




1,502




1,395




1,404




3,396


Total non-performing assets


$

4,208



$

4,436



$

4,077



$

3,101



$

6,820




(1)

September 30, 2017 capital ratios are estimated, subject to regulatory filings.


 


 

SUN BANCORP, INC. AND SUBSIDIARIES

AVERAGE BALANCE SHEETS (Unaudited)

(dollars in thousands)




For the Three Months Ended



For the Three Months Ended





September 30, 2017



September 30, 2016





Average







Average



Average







Average





Balance



Interest



Yield/Cost



Balance



Interest



Yield/Cost



Interest-earning assets:


























Loans receivable (1), (2)


























Commercial


$

1,281,922



$

13,732




4.28


%

$

1,215,135



$

12,230




4.03


%

Home equity and other



109,842




1,285




4.68




128,078




1,354




4.23



Residential real estate



193,663




1,643




3.39




233,277




1,998




3.43



Total loans receivable



1,585,427




16,660




4.20




1,576,490




15,582




3.95



Investment securities



295,885




1,694




2.29




312,629




1,734




2.22



Interest-earning bank balances



91,358




289




1.27




112,413




144




0.51



Total interest-earning assets



1,972,670




18,643




3.78




2,001,532




17,460




3.49





























Total non-interest-earning assets



218,918












185,950











Total assets


$

2,191,588











$

2,187,482











Interest-bearing liabilities:


























Interest-bearing deposit accounts:


























Interest-bearing demand deposit


$

667,538




409




0.25


%

$

678,636




374




0.22


%

Savings deposits



248,680




216




0.35




241,960




202




0.33



Time deposits



369,883




1,033




1.12




386,802




981




1.01



Total interest-bearing deposit accounts



1,286,101




1,658




0.52




1,307,398




1,557




0.48



Long-term borrowings:


























FHLBNY Advances



85,283




432




2.03




85,514




434




2.03



Obligations under capital lease



6,019




105




6.98




6,441




110




6.83



Junior subordinated debentures



57,992




413




2.85




92,786




646




2.78



Total borrowings



149,294




950




2.55




184,741




1,190




2.58



Total interest-bearing liabilities



1,435,395




2,608




0.73




1,492,139




2,747




0.74



Non-interest-bearing liabilities:


























Non-interest-bearing demand deposits



414,554












402,465











Other liabilities



12,645












25,947











Total non-interest-bearing liabilities



427,199












428,412











Total liabilities



1,862,594












1,920,551





































Shareholders' equity



328,994












266,931











Total liabilities and shareholders' equity


$

2,191,588











$

2,187,482











Net interest income






$

16,035











$

14,713







Interest rate spread (3)











3.05


%










2.75


%

Net interest margin (4)











3.25


%










2.94


%

Ratio of average interest-earning assets

   to average interest-bearing liabilities











137


%










134


%



(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 rate spread represents the difference between the average yield on interest-earning assets and the average cost of interest-bearing liabilities.

(4)

Net interest margin represents net interest income as a percentage of average interest-earning assets.

 

SUN BANCORP, INC. AND SUBSIDIARIES

AVERAGE BALANCE SHEETS (Unaudited)

(dollars in thousands)




For the Nine Months Ended



For the Nine Months Ended





September 30, 2017



September 30, 2016





Average







Average



Average







Average





Balance



Interest



Yield/Cost



Balance



Interest



Yield/Cost



Interest-earning assets:


























Loans receivable (1), (2)


























Commercial and industrial


$

1,280,369



$

39,570




4.11


%

$

1,190,942



$

35,800




4.00


%

Home equity



114,014




3,814




4.45




135,368




4,282




4.21



Residential real estate



201,883




5,173




3.41




240,498




6,197




3.43



Total loans receivable



1,596,266




48,557




4.05




1,566,808




46,279




3.93



Investment securities



305,315




5,282




2.30




301,579




5,124




2.26



Interest-earning bank balances



97,793




751




1.02




128,691




489




0.51



Total interest-earning assets



1,999,374




54,590




3.63




1,997,078




51,892




3.46





























Total non-interest-earning assets



221,897












183,856











Total assets


$

2,221,271











$

2,180,934











Interest-bearing liabilities:


























Interest-bearing deposit accounts:


























Interest-bearing demand deposits


$

665,370




1,200




0.24


%

$

696,920



$

1,115




0.21


%

Savings deposits



245,358




628




0.34




236,750




563




0.32



Time deposits



388,894




3,210




1.10




370,851




2,627




0.94



Total interest-bearing deposit accounts



1,299,622




5,038




0.52




1,304,521




4,305




0.44



Short-term borrowings:


























Repurchase agreements with customers



?




?




?




?




?




?



Long-term borrowings:


























FHLBNY advances



85,333




1,285




2.00




85,540




1,294




2.01



Obligations under capital lease



6,126




317




6.88




6,541




336




6.83



Junior subordinated debentures



81,004




2,281




3.75




92,786




1,886




2.70



Total borrowings



172,463




3,883




2.99




184,867




3,516




2.53



Total interest-bearing liabilities



1,472,085




8,921




0.81




1,489,388




7,821




0.70



Non-interest-bearing liabilities:


























Non-interest-bearing demand deposits



409,108












404,563











Other liabilities



14,000












24,021











Total non-interest-bearing liabilities



423,108












428,584











Total liabilities



1,895,193












1,917,972





































Shareholders' equity



326,078












262,962











Total liabilities and shareholders' equity


$

2,221,271











$

2,180,934











Net interest income






$

45,669











$

44,071







Interest rate spread (3)











2.82


%










2.76


%

Net interest margin (4)











3.04


%










2.94


%

Ratio of average interest-earning assets

   to average interest-bearing liabilities











136


%










134


%



(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 rate spread represents the difference between the average yield on interest-earning assets and the average cost of interest-bearing liabilities.

(4)

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



For the Three Months Ended





September 30, 2017



June 30, 2017





Average







Average



Average







Average





Balance



Interest



Yield/Cost



Balance



Interest



Yield/Cost



Interest-earning assets:


























Loans receivable (1), (2)


























Commercial


$

1,281,922



$

13,732




4.28


%

$

1,288,517



$

13,221




4.10


%

Home equity and other



109,842




1,285




4.68




114,330




1,271




4.45



Residential real estate



193,663




1,643




3.39




202,659




1,731




3.42



Total loans receivable



1,585,427




16,660




4.20




1,605,506




16,223




4.04



Investment securities



295,885




1,694




2.29




311,935




1,781




2.28



Interest-earning bank balances



91,358




289




1.27




93,305




248




1.06



Total interest-earning assets



1,972,670




18,643




3.78




2,010,746




18,252




3.63





























Total non-interest-earning assets



218,918












221,231











Total assets


$

2,191,588











$

2,231,977











Interest-bearing liabilities:


























Interest-bearing deposit accounts:


























Interest-bearing demand deposits


$

667,538




409




0.25


%

$

661,415



$

402




0.24


%

Savings deposits



248,680




216




0.35




246,895




211




0.34



Time deposits



369,883




1,033




1.12




389,869




1,081




1.11



Total interest-bearing deposit accounts



1,286,101




1,658




0.52




1,298,179




1,694




0.52



Long-term borrowings:


























FHLB advances



85,283




432




2.03




85,334




430




2.02



Obligations under capital lease



6,019




105




6.98




6,127




105




6.85



Junior subordinated debentures



57,992




413




2.85




92,616




1,161




5.01



Total borrowings



149,294




950




2.55




184,077




1,696




3.69



Total interest-bearing liabilities



1,435,395




2,608




0.73




1,482,256




3,390




0.91



Non-interest-bearing liabilities:


























Non-interest-bearing demand deposits



414,554












409,694











Other liabilities



12,645












14,108











Total non-interest-bearing liabilities



427,199












423,802











Total liabilities



1,862,594












1,906,058





































Shareholders' equity



328,994












325,919











Total liabilities and shareholders' equity


$

2,191,588











$

2,231,977











Net interest income






$

16,035











$

14,862







Interest rate spread (3)











3.05


%










2.72


%

Net interest margin (4)











3.25


%










2.96


%

Ratio of average interest-earning assets

   to average interest-bearing liabilities











137


%










136


%





























(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 rate spread represents the difference between the average yield on interest-earning assets and the average cost of interest-bearing liabilities.

(4)

Net interest margin represents net interest income as a percentage of average interest-earning assets.

 

SOURCE Sun Bancorp, Inc.


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