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Sun Bancorp Inc. has a market cap of $117.8 million; its shares were traded at around $4.18 with and P/S ratio of 0.7. SNBC is in the portfolios of Private Capital of Private Capital Management, Chuck Royce of Royce& Associates.
Highlight of Business Operations:Total assets were $3.60 billion at September 30, 2010 as compared to $3.58 billion at December 31, 2009. Cash and cash equivalents increased $146.1 million due, in large part, to the closing of the transactions pursuant to the previously announced Securities Purchase Agreements which occurred on September 22, 2010 (see Note 15 to the Notes to the Unaudited Condensed Consolidated Financial Statements). Total investments and other assets increased $21.9 million, or 4.8%, and $29.6 million, or 33.1%, respectively. These increases were offset by decreases in goodwill of $89.7 million, or 70.1%, loans, net of allowance for loan losses, of $49.5 million, or 1.9%, and the deferred tax asset of $20.7 million, or 100%. Total liabilities increased $78.3 million, or 2.4%, to $3.30 billion at September 30, 2010 compared to $3.22 billion at December 31, 2009 as deposits and other liabilities increased $142.6 million, or 4.9%, and $38.4 million, or 51.8%, respectively. These increases were offset by a decrease in federal funds purchased of $89.0 million. Stockholders equity was $303.0 million at September 30, 2010 as compared to $356.6 million at December 31, 2009 primarily due to the increase in the retained deficit of $156.9 million, offset by increases from the preferred stock issuance of $88.0 million and common stock issuance of $14.2 million.
Loans, net of allowance for loan losses, decreased $49.5 million to $2.61 billion at September 30, 2010 as compared to $2.68 billion at December 31, 2009. This decrease was driven by a reduction in total gross loans of $34.9 million, or 1.3%, coupled with an increase in the allowance for loan losses of $14.6 million, or 24.4%. The decrease in gross loans was primarily the result of net charge-offs for the nine months ending September 30, 2010 of $51.4 million. Despite the current economic environment, the Company has not altered its credit underwriting standards.
The Company s allowance for losses on loans increased to $74.6 million, or 2.78% of gross loans receivable, at September 30, 2010 from $60.0 million, or 2.21% of loans receivable, at December 31, 2009. The provision for loan losses was $66.0 million for the nine months ended September 30, 2010 compared to $27.2 million for the same period in 2009. Higher reserve balances reflect a migration of loans to higher risk categories and continued pressure on collateral values and increased qualitative factors as a result of the increasing negative trends in our portfolio. Across the commercial and consumer loan portfolio, the Company continues to closely monitor areas of weakness and take expedient and appropriate action as necessary to ensure adequate reserves. Net charge-offs for the nine months ended September 30, 2010 were $51.4 million, or 1.9% of average loans outstanding. The most significant write downs were $9.2 million related to a fraud for a commercial borrower and $5.5 million that resulted from a lending relationship to a local country club. The local country club was adversely impacted by the decrease in discretionary spending that was a noteworthy highlight of the 2009 economic downturn which severely impacted the membership of this club resulting in a non-performing and impaired loan. The charge-off was based upon the reappraisal of the property which showed a reduced value from original underwriting.
Real estate owned decreased $5.3 million to $4.3 million at September 30, 2010 as compared to December 31, 2009. During the nine months ended September 30, 2010, the Company sold one commercial property and two residential properties, with carrying amounts of $8.0 million and $57,000 respectively, resulting in a combined net loss of $9,000. The Company moved one commercial property, with an estimated fair value of $1.9 million, into operations. In addition, during the first nine months of 2010, the Company added four commercial properties to the real estate owned portfolio, at a total cost of $3.2 million, one residential property for $201,000, and four bank properties aggregating $1.4 million. There are 12 properties currently housed in our OREO portfolio of which six are former bank branches. The assets and liabilities of four bank branches added to OREO during the third quarter had been consolidated into four other existing branches.
Investment securities available for sale increased $25.5 million, or 5.9%, from $434.7 million at December 31, 2009 to $460.2 million at September 30, 2010. Investment securities held to maturity decreased $3.1 million, or 44.9%, from $7.0 million at December 31, 2009 to $3.9 million at September 30, 2010. The overall increase in the investment securities portfolio was a result of purchases and reinvestments in fixed-rate federal agency and mortgage-backed securities. This increase was offset by a decrease of $15.0 million related to the call of a trust preferred security. The Company s reinvestment strategy for the remainder of 2010 is to maintain an average life and duration profile similar to the Company s current position.
Net interest income (on a tax-equivalent basis) increased $1.3 million to $28.3 million for the three months ended September 30, 2010, from $27.0 million for the same period in 2009. Interest income (on a tax-equivalent basis) decreased $1.4 million from the comparable year to $37.0 million while interest expense decreased $2.7 million from the comparable prior year period to $8.7 million. The interest rate spread and net interest margin (on a tax-equivalent basis) for the three months ended September 30, 2010 were 3.24% and 3.47%, respectively, compared to 3.06% and 3.36%, respectively, for the same period in 2009. The increase in margin for the three months ended September 30, 2010 over the comparable prior year period reflects the Company s continued focus on margin improvement initiatives. Such initiatives, which began in 2009, include higher lending spreads, the implementation of interest rate floors on new and renewable variable rate loans and reductions in deposit rates.
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