snbc-ex991

Sun Bancorp, Inc. Announces Second Quarter Net Income of $1.5 Million, or $0.08 per Diluted Share; Board of Directors Declares Quarterly Dividend of $0.01

Sun Bancorp, Inc. (NASDAQ: SNBC), (the “Company”), the holding company for Sun National Bank (the “Bank”), today reported net income of $1.5 million, or $0.08 per diluted share, for the quarter ended June 30, 2017, compared to net income of $1.4 million, or $0.07 per diluted share, for the quarter ended March 31, 2017, and net income of $3.0 million, or $0.16 per diluted share, for the quarter ended June 30, 2016.

On June 30, 2017, the Company entered into a definitive agreement with OceanFirst Financial Corp. (NASDAQ: OCFC) (“OceanFirst”), pursuant to which the Company will merge with and into OceanFirst with OceanFirst as the surviving entity (the “Merger”). The Merger is expected to close in the first quarter of 2018, subject to each company receiving the required approval of its shareholders, receipt of all required regulatory approvals and other customary closing conditions.

“This quarter was particularly noteworthy for our continued success in managing non-interest expense and our cost of funds, as well as realizing the predicted improvement in the net interest margin,” said Thomas M. O’Brien, President & CEO. “This represents our tenth consecutive profitable quarter, as well as our fifth consecutive quarterly dividend declaration. This trend of consistently improving our financial performance ultimately culminated with the announcement of the merger agreement with OceanFirst at the end of the quarter. This strategic partnership represents a milestone for the Company, and recognizes the significant achievements we have made in the last three years. OceanFirst is an ideal partner whose focus on the community bank business model, geographic markets and business strategies complement those of the Company. We believe that combining our institutions will create a premier New Jersey community bank that will provide significant value for our shareholders, while also benefiting our customers and the communities that we serve.”

Total assets decreased to $2.22 billion at June 30, 2017, as compared to $2.26 billion at both March 31, 2017 and December 31, 2016. Cash and cash equivalents totaled $127.8 million at June 30, 2017, as compared to $128.9 million at March 31, 2017 and $134.2 million at December 31, 2016. The decrease in cash and cash equivalents during the first six months of 2017 was primarily due to a reduction in brokered and subscription deposits and the redemption of $15 million of trust preferred securities, partially offset by decreases in net loans receivable and investment securities.

Investment securities decreased by $15.6 million to $300.0 million at June 30, 2017 from $315.6 million in the prior linked quarter primarily due to pay downs of $28.9 million and the sale of the remaining collateralized

lending obligations portfolio of $13.5 million, partially offset by $26.2 million in purchases of primarily variable rate mortgage-backed securities.

Net loans decreased by $20.2 million to $1.57 billion at June 30, 2017 as compared to $1.59 billion at each of March 31, 2017 and December 31, 2016, due primarily to the decrease in loan origination and refinancing activity in the Commercial Real Estate (“CRE”) business during the second quarter of 2017. As a result of the reduction in originations and refinancing activity, non-owner occupied CRE loans fell by $18.3 million in the second quarter. Offsetting this decrease, the Bank experienced continued momentum in its Commercial and Industrial (“C&I”) business segment. The C&I segment, which includes owner-occupied CRE and C&I, grew by $9.2 million in the second quarter and has grown 15% annualized in the first half of 2017, due to an increase of $21 million in C&I loans, offset by a decrease of $11.8 million in owner-occupied CRE loans. Offsetting this growth was continued reductions in residential and home equity loans which fell by $12.0 million in the second quarter as the Bank continued its strategy of not originating new consumer loans.

“Our stated goal of strategically growing the C&I segment continued in this quarter,” stated O’Brien. “Our C&I lending team continues to build momentum throughout the region. On the CRE segment, we saw slower activity primarily as a result of both higher interest rates as well as continued uncertainty regarding tax reform.”

Total deposits decreased to $1.71 billion at June 30, 2017, as compared to $1.73 billion at March 31, 2017 and $1.74 billion at December 31, 2016 due primarily to planned runoff in brokered deposits and subscription deposits. The cost of deposits increased by one basis point to 40 basis points compared to the prior linked quarter and increased by six basis points as compared to the six months ended June 30, 2016 due to the impact of the recent increase in market interest rates and growth in retail certificates of deposit. Non-interest deposits rose by $4.5 million to $409.7 million.

“Our ongoing strategy of growing relationship-based deposits continued in the second quarter,” stated O’Brien. “As we reduced our wholesale brokered and other non-relationship deposit accounts, we saw mild growth in our non-interest deposit base. Despite increasing rates in the external environment, our cost of deposits remains stable and attractive relative to our peers. We have worked hard to stabilize and grow our deposit portfolio and the related fee income appropriately derived from it.”

Net interest income was $14.9 million for the three months ended June 30, 2017, compared to $14.8 million for the three months ended March 31, 2017, and $14.9 million for the three months ended June 30, 2016. The

Company’s net interest margin was 2.96% for the three months ended June 30, 2017 as compared to 2.93% for three months ended March 31, 2017 and 2.98% for the three months ended June 30, 2016. 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. Previous external increases in short-term market interest rates provided a lift to the net interest margin due to the asset-sensitive position in the Company’s balance sheet. The cost of deposits rose by one basis point in the quarter to 0.40% while the loan yield rose by eight basis points to 4.05%. The Company anticipates $1.2 million of annualized savings due to the trust preferred redemptions.

“In recent years, our elevated cash position has suppressed our net interest margin,” said O’Brien. “We believe that the Company deployed excess liquidity prudently with shorter asset durations and emphasized low cost relationship deposit strategies when interest rates were low. These tactics are now providing a benefit in the net interest margin after the three moves in short-term interest rates since December of 2016. Once the Company realizes the full benefit of the trust preferred redemptions, the net interest margin will continue to move in a favorable direction.”

Non-interest income was $3.0 million for the quarter ended June 30, 2017, as compared to $3.4 million and $3.8 million for the quarters ended March 31, 2017 and June 30, 2016, respectively. The decrease in non-interest income from the quarter ended March 31, 2017 is due primarily to two loan related fees totaling $550 thousand that were recorded in the first quarter of 2017. The decrease from the prior year quarter was due to investment sale gains of $426 thousand in the quarter ended June 30, 2016 and higher deposit service charges and fees and investment products income in the prior year quarter.

Non-interest expense for the second quarter of 2017 was $16.3 million as compared to $16.1 million for the three months ended March 31, 2017 and $17.1 million for the three months ended June 30, 2016. The increase in non-interest expense from the prior linked quarter is due primarily to an increase of $580 thousand in professional fees, partially offset by a $300 thousand expense related to an outstanding letter of credit on a previously-sold legacy loan recorded in the first quarter of 2017. Professional fees in the second quarter of 2017 include $400 thousand of Merger related expenses. Non-interest expense for the second quarter of 2017 declined by $777 thousand compared to the second quarter of 2016, primarily due to a decrease of $148 thousand in insurance expense as a result of reductions in FDIC assessment rates, a decrease of $367 thousand in salaries and employee benefit expense, a decrease of $117 thousand in problem loan expense, as well as a

decrease of $164 thousand in data processing expense due to efficiency gains, partially offset by an increase of $74 thousand related to equipment expenses. The Bank recorded a vacation accrual in the second quarter of 2017 of $461 thousand. This expense will be reversed in the second half of the year.

“Our ability to manage expenses continues to be a strength at the Company,” said O’Brien. “While we experienced a one-time Merger-related expense in the current quarter of $400 thousand and some other elevated expenses in the second quarter due to a system conversion, we continue to see favorable long-term trends in operating expenses and additional opportunities to reduce operating expenses further in coming quarters.”

Non-performing loans increased by $359 thousand to $4.4 million, or 0.28% of gross loans, at June 30, 2017 from $4.1 million, or 0.25% of gross loans, at March 31, 2017. This increase was primarily due to residential mortgage loans entering non-accrual status during the three months ended June 30, 2017. Non-performing loans were $5.8 million, or 0.35% of gross loans, at June 30, 2016.

There was a negative provision for loan losses of $831 thousand during the quarter ended June 30, 2017 compared to no provision for loan losses during the quarter ended March 31, 2017 and a negative provision for loan losses of $1.7 million recorded in the second quarter of 2016. Continued credit strength, limited charge-off activity, net recoveries of $59 thousand and loan pay downs resulted in a reduced reserve need at June 30, 2017. In the first six months of 2017, the Bank recorded net recoveries of $234 thousand as compared to net charge-offs of $434 thousand in the first six months of 2016. The allowance for loan losses was $14.9 million, or 0.94% of gross loans, at June 30, 2017 as compared to $15.7 million, or 0.98% of gross loans, at March 31, 2017 and $16.0 million, or 1.02% of gross loans, at June 30, 2016. The allowance for loan losses was 337% of non-performing loans at June 30, 2017 as compared to 385% of non-performing loans at March 31, 2017 and 289% of non-performing loans at June 30, 2016.

The Company’s capital ratios continue to remain very strong due to positive earnings and a relatively flat balance sheet. The redemption of trust preferred securities during the second quarter reduced the Company’s Tier 2 capital only, and thus only impacted the Company’s total risk-based capital ratio. All capital ratios remain at robust levels and are sufficient to support the Company’s strategic plan. At June 30, 2017, the Bank had a Tier 1 common equity risk-based capital ratio of 18.3%, total risk-based capital ratio of 19.3%, a Tier 1 risk-based capital ratio of 18.3% and a leverage capital ratio of 13.6%. At June 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 16.2%, 21.4%, 19.7%, and 14.7%, respectively. The Company’s tangible equity to tangible assets ratio was 13.2% at June 30, 2017, as compared to 12.8% at March 31, 2017 and 10.5% at June 30, 2016.

On July 25, 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 August 22, 2017, payable on September 6, 2017.

“Our primary focus has continued to be delivering value to shareholders,” said O’Brien. “Our regular quarterly dividends reflect our commitment to delivering value to stockholders and our announced transaction with OceanFirst demonstrates our commitment to creating long-term strategic value as well.”

The Company will hold a conference call on Wednesday, July 26, 2017 at 11:00 a.m. (EDT) 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:

A transcript of the conference call will be available at the Investor Relations section of www.sunnationalbank.com following the call.

Sun Bancorp, Inc. (NASDAQ: SNBC) is a $2.22 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.

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. This press release may also contain forward-looking statements about the benefits of the Merger with OceanFirst, including future financial and operating results of OceanFirst, the Company or the combined institution following the Merger, the combined institution’s plans, objectives, expectations and intentions, the expected timing of the completion of the Merger, the likelihood of success and other statements 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, including receipt of approval from each company’s shareholders, (ii) the potential impact of announcement or consummation of the Merger on relationships with third parties, including customers, employees, and competitors, (iii) business disruption following the Merger, (iv) difficulties and delays in integrating the OceanFirst and Company businesses or fully realizing cost savings and other benefits, (v) OceanFirst’s potential exposure to unknown or contingent liabilities of the Company, (vi) the Company’s ability to attract and retain key management and staff; (vii) changes in business strategy or an inability to successfully execute strategy due to the occurrence of unanticipated events; (viii) the ability to attract deposits and other sources of liquidity; (ix) changes in the financial performance and/or condition of the Bank’s borrowers; (x) changes in consumer spending, borrowing and saving habits; (xi) the ability to increase market share and control expenses; (xii) changes in estimates of future loan loss reserve requirements based upon the periodic review thereof under relevant regulatory and accounting requirements; (xiii) local, regional and national economic conditions and events and the impact they may have on the Company and its customers; (xiv) volatility in the credit and equity markets and its effect on the general economy; (xv) the credit risks of lending activities, including changes in the level and trend of loan delinquencies and write-offs; (xvi) the overall quality of the composition of the Company’s loan and securities portfolios; (xvii) inflation, interest rate, securities market and monetary fluctuations;(xviii) 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; (xix) 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; (xx) competition among providers of financial services; and (xxi) 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.

In connection with the Merger, OceanFirst intends to file a registration statement on Form S-4 with the Securities and Exchange Commission ("SEC"), which includes a joint proxy statement of the Company and OceanFirst and a prospectus of OceanFirst, and each party has and will file other documents regarding the Merger with the SEC. When available, copies of the definitive joint proxy statement/prospectus will also be sent to Company stockholders seeking any required stockholder approvals. Before making any voting or investment decision, investors and security holders of the Company are urged to carefully read the entire registration statement and joint proxy statement/prospectus, when they become available, as well as any amendments or supplements to these documents, because they will contain important information about the proposed transaction. The documents filed by OceanFirst and the Company with the SEC may be obtained free of charge at the SEC's website at www.sec.gov. In addition, the documents filed by OceanFirst may be obtained free of charge at OceanFirst's website at www.oceanfirstonline.com and the documents filed by the Company may be obtained free of charge at the Company’s website at www.sunnationalbank.com. Alternatively, these documents, when available, can be obtained free of charge from OceanFirst upon written request to OceanFirst Financial Corp., Attn: Christopher D. Maher, 975 Hooper Avenue, Toms River, New Jersey 08753, or upon written request to Sun Bancorp, Inc., Attn: Janice M. Clark, Corporate Secretary, 350 Fellowship Road, Suite 101, Mount Laurel, NJ 08054.

OceanFirst, the Company, their directors, executive officers and certain other persons may be deemed to be participants in the solicitation of proxies from OceanFirst's and the Company’s stockholders in favor of the approval of the Merger. Information about the directors and executive officers of OceanFirst and their ownership of OceanFirst common stock is set forth in the proxy statement for OceanFirst's 2017 annual meeting of stockholders, as previously filed with the SEC on April 26, 2017. Information about the directors and executive officers of the Company and their ownership of Company common stock is set forth in the Company’s proxy statement for the Company’s 2017 annual meeting of stockholder as previously filed with

the SEC on March 30, 2017. Stockholders may obtain additional information regarding the interests of such participants in the Merger by reading the registration statement and the proxy statement/prospectus when they become available.

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.

The following reconciles shareholders’ equity to tangible equity by reducing shareholders’ equity by the intangible asset balance at June 30, 2017, March 31, 2017, December 31, 2016, September 30, 2016 and June 30, 2016.

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

	For the Three Months Ended						For the Six Months Ended
	June 30,						June 30,
	2017			2016			2017			2016
Profitability for the period:
Net interest income	$	14,863		$	14,872		$	29,635		$	29,358
(Recovery of) provision for loan losses		(831	)		(1,682	)		(831	)		(1,682	)
Non-interest income		3,000			3,774			6,431			6,936
Non-interest expense		16,289			17,066			32,351			33,590
Income before income taxes		2,405			3,262			4,546			4,386
Income tax expense (benefit)		950			299			1,661			598
Net income available to common shareholders	$	1,455		$	2,963		$	2,885		$	3,788
Financial ratios:
Return on average assets ⁽¹⁾		0.3	%		0.5	%		0.3	%		0.2	%
Return on average equity ⁽¹⁾		1.8	%		4.5	%		1.8	%		5.8	%
Return on average tangible equity ^{(1), (2)}		2.0	%		5.3	%		2.0	%		6.8	%
Net interest margin ⁽¹⁾		2.96	%		2.98	%		2.94	%		2.94	%
Efficiency ratio		91	%		92	%		90	%		93	%
Income per common share:
Basic	$	0.08		$	0.16		$	0.15		$	0.20
Diluted	$	0.08		$	0.16		$	0.15		$	0.20

Average equity to average assets		14.6	%		12.0	%		14.5	%		12.0	%

	June 30,						December 31,
	2017			2016				2016
At period-end:
Total assets	$	2,216,802		$	2,186,982		$	2,262,262
Total deposits		1,708,253			1,713,665			1,741,363
Loans receivable, net of allowance for loan losses		1,574,167			1,548,593			1,594,377
Loans held-for-sale		—			540			—
Investments		299,987			296,714			311,727
Borrowings		91,396			92,011			91,708
Junior subordinated debentures		77,322			92,786			92,786
Shareholders' equity		325,060			264,172			319,709

Credit quality and capital ratios:
Allowance for loan losses to gross loans held-for-investment		0.94	%		1.02	%		0.97	%
Non-performing loans held-for-investment to gross loans held-for-investment		0.28	%		0.35	%		0.19	%
Non-performing assets to total assets		0.20	%		0.27	%		0.14	%
Allowance for loan losses to non-performing loans held-for-investment		337	%		289	%		501	%
Tier 1 common equity risk-based capital:
Sun Bancorp, Inc.		16.2	%		14.3	%		16.0	%
Sun National Bank		18.3	%		18.1	%		18.9	%
Total risk-based capital:
Sun Bancorp, Inc.		21.4	%		21.0	%		21.6	%
Sun National Bank		19.3	%		19.1	%		19.8	%
Tier 1 risk-based capital:
Sun Bancorp, Inc.		19.7	%		17.9	%		18.9	%
Sun National Bank		18.3	%		18.1	%		18.9	%
Leverage capital:
Sun Bancorp, Inc.		14.7	%		13.2	%		14.6	%
Sun National Bank		13.6	%		13.3	%		14.5	%

Book value per common share	$	17.05		$	14.01		$	16.90
Tangible book value per common share	$	15.05		$	11.99		$	14.88

	June 30,			December 31,
	2017			2016
ASSETS
Cash and due from banks	$	22,086		$	19,645
Interest earning bank balances		105,745			114,563
Cash and cash equivalents		127,831			134,208
Restricted cash		1,000			5,000
Investment securities available for sale (amortized cost of $285,854 and $300,028 at June 30, 2017 and December 31, 2016, respectively)		282,598			295,686
Investment securities held to maturity (estimated fair value of $250 at June 30, 2017 and December 31, 2016)		250			250
Loans receivable (net of allowance for loan losses of $14,945 and $15,541 at June 30, 2017 and December 31, 2016, respectively)		1,574,167			1,594,377
Restricted equity investments, at cost		17,139			15,791
Bank properties and equipment, net		28,962			30,148
Accrued interest receivable		4,944			5,122
Goodwill		38,188			38,188
Bank owned life insurance (BOLI)		84,081			83,109
Deferred taxes, net		49,442			51,573
Other assets		8,200			8,810
Total assets	$	2,216,802		$	2,262,262
LIABILITIES AND SHAREHOLDERS' EQUITY
Liabilities:
Deposits	$	1,708,253		$	1,741,363
Advances from the Federal Home Loan Bank of New York (FHLBNY)		85,317			85,416
Obligations under capital lease		6,079			6,292
Junior subordinated debentures		77,322			92,786
Other liabilities		14,771			16,696
Total liabilities		1,891,742			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; 19,133,815 shares issued and 19,060,593 shares outstanding at June 30, 2017; 19,030,704 shares issued and 18,922,726 shares outstanding at December 31, 2016.		95,669			95,154
Additional paid-in capital		509,124			508,593
Retained deficit		(273,997	)		(276,501	)
Accumulated other comprehensive loss		(1,926	)		(2,568	)
Deferred compensation plan trust		(1,258	)		(1,160	)
Treasury stock at cost, 73,222 shares at June 30, 2017 and 107,978 shares at December 31, 2016.		(2,552	)		(3,809	)
Total shareholders' equity		325,060			319,709
Total liabilities and shareholders' equity	$	2,216,802		$	2,262,262

	For the Three Months Ended						For the Six Months Ended
	June 30,						June 30,
	2017			2016			2017			2016
INTEREST INCOME:
Interest and fees on loans	$	16,224		$	15,666		$	31,897		$	30,697
Interest on taxable investment securities		1,797			1,618			3,582			3,298
Dividends on restricted equity investments		230			214			468			437
Total interest income		18,251			17,498			35,947			34,432
INTEREST EXPENSE:
Interest on deposits		1,693			1,456			3,379			2,748
Interest on funds borrowed		534			542			1,065			1,086
Interest on junior subordinated debentures		1,161			628			1,868			1,240
Total interest expense		3,388			2,626			6,312			5,074
Net interest income		14,863			14,872			29,635			29,358
(RECOVERY OF) PROVISION FOR LOAN LOSSES		(831	)		(1,682	)		(831	)		(1,682	)
Net interest income after provision for loan losses		15,694			16,554			30,466			31,040
NON-INTEREST INCOME:
Deposit service charges and fees		1,367			1,618			2,769			3,198
Interchange fees		510			486			977			970
Investment products income		327			538			611			914
BOLI income		488			489			972			997
Other income		308			643			1,102			857
Total non-interest income		3,000			3,774			6,431			6,936
NON-INTEREST EXPENSE:
Salaries and employee benefits		8,966			9,333			17,848			18,396
Occupancy expense		2,252			2,144			4,602			4,482
Equipment expense		1,142			1,068			2,299			2,159
Data processing expense		911			1,075			1,930			2,263
Professional fees		1,116			537			1,652			1,008
Insurance expense		408			556			803			1,344
Advertising expense		346			393			659			775
Problem loan expense		70			187			204			220
Other expense		1,078			1,773			2,354			2,943
Total non-interest expense		16,289			17,066			32,351			33,590
INCOME BEFORE INCOME TAXES		2,405			3,262			4,546			4,386
INCOME TAX EXPENSE		950			299			1,661			598
NET INCOME AVAILABLE TO COMMON SHAREHOLDERS	$	1,455		$	2,963		$	2,885		$	3,788

Basic earnings per share	$	0.08		$	0.16		$	0.15		$	0.20
Diluted earnings per share	$	0.08		$	0.16		$	0.15		$	0.20

Weighted average shares - basic		19,059,626			18,848,236			19,023,024			18,793,987
Weighted average shares - diluted		19,191,294			18,957,201			19,149,326			18,889,561

	2017			2017			2016			2016			2016
	Q2			Q1			Q4			Q3			Q2
Profitability for the quarter:
Net interest income	$	14,863		$	14,772		$	14,834		$	14,712		$	14,872
(Recovery of) provision for loan losses		(831	)		—			—			—			(1,682	)
Non-interest income		3,000			3,431			3,311			3,142			3,774
Non-interest expense		16,289			16,062			15,425			15,937			17,066
Income before income taxes		2,405			2,141			2,720			1,917			3,262
Income tax expense (benefit)		950			711			(53,280	)		287			299
Net income available to common shareholders	$	1,455		$	1,430		$	56,000		$	1,630		$	2,963
Financial ratios:
Return on average assets ⁽¹⁾		0.3	%		0.3	%		10.2	%		0.3	%		0.5	%
Return on average equity ⁽¹⁾		1.8	%		1.8	%		83.7	%		2.4	%		4.5	%
Return on average tangible equity ^{(1), (2)}		2.0	%		2.0	%		97.7	%		2.9	%		5.3	%
Net interest margin ⁽¹⁾		2.96	%		2.93	%		2.93	%		2.94	%		2.98	%
Efficiency ratio		91	%		88	%		85	%		89	%		93	%
Per share data:
Income per common share:
Basic	$	0.08		$	0.08		$	2.96		$	0.09		$	0.16
Diluted	$	0.08		$	0.07		$	2.94		$	0.09		$	0.16
Book value	$	17.05		$	16.94		$	16.90		$	14.08		$	14.01
Tangible book value	$	15.05		$	14.94		$	14.88		$	12.05		$	11.99
Cash dividends paid	$	0.01		$	0.01		$	0.01		$	0.01		$	—
Average basic shares		19,059,626			18,986,015			18,908,688			18,874,577			18,848,236
Average diluted shares		19,191,294			19,107,226			19,016,188			18,962,740			18,957,201
Non-interest income:
Deposit service charges and fees	$	1,367		$	1,402		$	1,484		$	1,540		$	1,618
Interchange fees		510			467			483			451			486
Gain on sale of investment securities		—			—			—			—			426
Gain on sale of loans		—			—			60			41			—
Investment products income		327			284			288			505			538
BOLI income		488			484			452			485			489
Other income		308			794			544			120			217
Total non-interest income	$	3,000		$	3,431		$	3,311		$	3,142		$	3,774
Non-interest expense:
Salaries and employee benefits	$	8,966		$	8,882		$	7,926		$	8,649		$	9,333
Occupancy expense		2,252			2,350			2,232			2,273			2,144
Equipment expense		1,142			1,157			1,324			1,303			1,068
Data processing expense		911			1,019			1,124			1,116			1,075
Professional fees		1,116			536			508			730			537
Insurance expense		408			395			368			452			556
Advertising expense		346			313			473			412			393
Problem loan expenses		70			134			61			131			187
Other expenses		1,078			1,276			1,409			871			1,773
Total non-interest expense	$	16,289		$	16,062		$	15,425		$	15,937		$	17,066

	2017			2017			2016			2016			2016
	Q2			Q1			Q4			Q3			Q2
Balance Sheet at quarter end:
Cash and cash equivalents	$	127,831		$	128,892		$	134,208		$	156,292		$	168,799
Restricted cash		1,000			1,000			5,000			5,000			5,000
Investment securities		299,987			315,558			311,727			308,031			296,714
Loans held-for-investment
Commercial and industrial		251,346			230,306			235,946			226,493			220,609
Commercial real estate - owner occupied		250,164			261,971			231,348			226,165			225,520
Commercial real estate - non-owner occupied		710,831			729,102			742,662			676,323			666,345
Land and development		67,042			67,336			67,165			84,692			82,018
Residential real estate		196,157			205,573			210,874			226,691			237,080
Home equity and other		113,572			116,187			121,923			126,302			132,912
Total loans		1,589,112			1,610,475			1,609,918			1,566,666			1,564,484
Allowance for loan losses		(14,945	)		(15,716	)		(15,541	)		(15,827	)		(15,891	)
Net loans held-for-investment		1,574,167			1,594,759			1,594,377			1,550,839			1,548,593
Loans held-for-sale		—			—			—			1,450			540
Goodwill		38,188			38,188			38,188			38,188			38,188
Total assets		2,216,802			2,255,773			2,262,262			2,189,346			2,186,982
Net deferred tax asset, before valuation allowance		123,107			125,238			124,574			125,051			126,744
Deferred tax valuation allowance		(73,665	)		(73,665	)		(127,973	)		(128,362	)		(129,248	)
Total deposits		1,708,253			1,733,989			1,741,363			1,717,634			1,713,665
Advances from the FHLBNY		85,317			85,367			85,416			85,465			85,513
Obligations under capital leases		6,079			6,187			6,292			6,396			6,498
Junior subordinated debentures		77,322			92,786			92,786			92,786			92,786
Total shareholders' equity		325,060			322,816			319,709			265,878			264,172

Quarterly average balance sheet:
Loans held-for-investment
Commercial	$	1,288,517		$	1,270,543		$	1,238,749		$	1,215,135		$	1,197,368
Residential real estate		202,659			209,500			220,502			233,277			240,884
Home equity and other		114,330			117,963			122,290			128,078			136,330
Total loans		1,605,506			1,598,006			1,581,541			1,576,490			1,574,582
Securities and other interest-earning assets		405,240			417,171			442,409			425,042			422,667
Total interest-earning assets		2,010,746			2,015,177			2,023,950			2,001,532			1,997,249
Total assets		2,231,978			2,240,787			2,201,886			2,187,482			2,179,400
Non-interest-bearing demand deposits		409,694			402,949			411,728			402,465			393,922
Total deposits		1,707,873			1,717,848			1,731,312			1,709,863			1,707,574
Total interest-bearing liabilities		1,482,256			1,499,303			1,504,138			1,492,139			1,498,510
Total shareholders' equity		325,919			323,258			267,542			266,931			262,517

	2017			2017			2016			2016			2016
	Q2			Q1			Q4			Q3			Q2

Capital and credit quality measures:
Tier 1 common equity risk-based capital:
Sun Bancorp, Inc.		16.2	%		15.8	%		16.0	%		14.5	%		14.3	%
Sun National Bank		18.3	%		17.8	%		18.9	%		18.3	%		18.1	%
Total risk-based capital:
Sun Bancorp, Inc.		21.4	%		21.9	%		21.6	%		21.2	%		21.0	%
Sun National Bank		19.3	%		18.8	%		19.8	%		19.3	%		19.1	%
Tier 1 risk-based capital:
Sun Bancorp, Inc.		19.7	%		19.2	%		18.9	%		18.1	%		17.9	%
Sun National Bank		18.3	%		17.8	%		18.9	%		18.3	%		18.1	%
Leverage capital:
Sun Bancorp, Inc.		14.7	%		14.5	%		14.6	%		13.3	%		13.2	%
Sun National Bank		13.6	%		13.4	%		14.5	%		13.4	%		13.3	%


Average equity to average assets		14.6	%		14.4	%		12.2	%		12.2	%		12.0	%
Allowance for loan losses to gross loans held-for-investment		0.94	%		0.98	%		0.97	%		1.01	%		1.02	%
Non-performing loans held-for-investment to gross loans held-for-investment		0.28	%		0.25	%		0.19	%		0.42	%		0.35	%
Non-performing assets to total assets		0.20	%		0.18	%		0.14	%		0.31	%		0.27	%
Allowance for loan losses to non-performing loans held-for-investment		337	%		385	%		501	%		238	%		289	%
Other data:
Net recoveries (charge-offs)		59			175			(285	)		(65	)		(378	)
Classified loans		7,979			7,752			6,887			8,593			9,310
Classified assets		11,185			10,958			10,094			11,799			12,516
Non-performing assets:
Non-accrual loans		2,934			2,682			1,697			3,246			2,580
Non-accrual loans held-for-sale		—			—			—			178			332
Troubled debt restructurings, non-accrual		1,502			1,395			1,404			3,396			2,918
Total non-performing assets	$	4,436		$	4,077		$	3,101		$	6,820		$	5,830

	For the Three Months Ended							For the Three Months Ended
	June 30, 2017							June 30, 2016
	Average				Average			Average				Average
	Balance		Interest		Yield/Cost			Balance		Interest		Yield/Cost
Interest-earning assets:
Loans receivable^{(1), (2)}
Commercial	$	1,288,517	$	13,221		4.10	%	$	1,197,368	$	12,141		4.06	%
Home equity and other		114,330		1,271		4.45			136,330		1,431		4.20
Residential real estate		202,659		1,731		3.42			240,884		2,094		3.48
Total loans receivable		1,605,506		16,223		4.04			1,574,582		15,666		3.98
Investment securities		311,935		1,781		2.28			296,811		1,673		2.25
Interest-earning bank balances		93,305		248		1.06			125,856		159		0.51
Total interest-earning assets		2,010,746		18,252		3.63			1,997,249		17,498		3.50

Total non-interest-earning assets		221,231							182,151
Total assets	$	2,231,977						$	2,179,400
Interest-bearing liabilities:
Interest-bearing deposit accounts:
Interest-bearing demand deposit	$	661,415		402		0.24	%	$	700,857		382		0.22	%
Savings deposits		246,895		211		0.34			239,079		192		0.32
Time deposits		389,869		1,081		1.11			373,716		882		0.94
Total interest-bearing deposit accounts		1,298,179		1,694		0.52			1,313,652		1,456		0.44
Long-term borrowings:
FHLBNY Advances		85,334		430		2.02			85,529		429		2.01
Obligations under capital lease		6,127		105		6.85			6,543		112		6.85
Junior subordinated debentures		92,616		1,161		5.01			92,786		629		2.71
Total borrowings		184,077		1,696		3.69			184,858		1,170		2.53
Total interest-bearing liabilities		1,482,256		3,390		0.91			1,498,510		2,626		0.70
Non-interest-bearing liabilities:
Non-interest-bearing demand deposits		409,694							393,922
Other liabilities		14,108							24,451
Total non-interest-bearing liabilities		423,802							418,373
Total liabilities		1,906,058							1,916,883

Shareholders' equity		325,919							262,517
Total liabilities and shareholders' equity	$	2,231,977						$	2,179,400
Net interest income			$	14,862						$	14,872
Interest rate spread ⁽³⁾						2.72	%						2.80	%
Net interest margin ⁽⁴⁾						2.96	%						2.98	%
Ratio of average interest-earning assets to average interest-bearing liabilities						136	%						133	%

	For the Six Months Ended							For the Six Months Ended
	June 30, 2017							June 30, 2016
	Average				Average			Average				Average
	Balance		Interest		Yield/Cost			Balance		Interest		Yield/Cost
Interest-earning assets:
Loans receivable ^{(1), (2)}
Commercial and industrial	$	1,279,580	$	25,838		4.04	%	$	1,178,645	$	23,570		4.00	%
Home equity		116,136		2,529		4.36			139,074		2,928		4.21
Residential real estate		206,061		3,530		3.43			244,168		4,199		3.44
Total loans receivable		1,601,777		31,897		3.98			1,561,887		30,697		3.93
Investment securities ⁽³⁾		310,108		3,588		2.31			295,963		3,390		2.29
Interest-earning bank balances		101,064		462		0.91			136,965		345		0.50
Total interest-earning assets		2,012,949		35,947		3.57			1,994,815		34,432		3.45

Total non-interest-earning assets		223,409							182,792
Total assets	$	2,236,358						$	2,177,607
Interest-bearing liabilities:
Interest-bearing deposit accounts:
Interest-bearing demand deposits	$	664,268		791		0.24	%	$	706,214	$	741		0.21	%
Savings deposits		243,669		412		0.34			234,102		361		0.31
Time deposits		398,556		2,177		1.09			362,744		1,646		0.91
Total interest-bearing deposit accounts		1,306,493		3,380		0.52			1,303,060		2,748		0.42
Short-term borrowings:
Repurchase agreements with customers		—		—		—			—		—		—
Long-term borrowings:
FHLBNY advances		85,359		853		2.00			85,553		860		2.01
Obligations under capital lease		6,180		212		6.86			6,592		226		6.86
Junior subordinated debentures		92,701		1,868		4.03			92,786		1,240		2.67
Total borrowings		184,240		2,933		3.18			184,931		2,326		2.52
Total interest-bearing liabilities		1,490,733		6,313		0.85			1,487,991		5,074		0.68
Non-interest-bearing liabilities:
Non-interest-bearing demand deposits		406,340							405,630
Other liabilities		14,689							23,042
Total non-interest-bearing liabilities		421,029							428,672
Total liabilities		1,911,762							1,916,663

Shareholders' equity		324,596							260,944
Total liabilities and shareholders' equity	$	2,236,358						$	2,177,607
Net interest income			$	29,634						$	29,358
Interest rate spread ⁽⁴⁾						2.72	%						2.77	%
Net interest margin ⁽⁵⁾						2.94	%						2.94	%
Ratio of average interest-earning assets to average interest-bearing liabilities						135	%						134	%

	For the Three Months Ended							For the Three Months Ended
	June 30, 2017							March 31, 2017
	Average				Average			Average				Average
	Balance		Interest		Yield/Cost			Balance		Interest		Yield/Cost
Interest-earning assets:
Loans receivable ^{(1), (2)}
Commercial	$	1,288,517	$	13,221		4.10	%	$	1,270,543	$	12,617		3.97	%
Home equity and other		114,330		1,271		4.45			117,963		1,258		4.27
Residential real estate		202,659		1,731		3.42			209,500		1,799		3.43
Total loans receivable		1,605,506		16,223		4.04			1,598,006		15,674		3.92
Investment securities		311,935		1,781		2.28			308,261		1,807		2.34
Interest-earning bank balances		93,305		248		1.06			108,910		215		0.79
Total interest-earning assets		2,010,746		18,252		3.63			2,015,177		17,696		3.51

Total non-interest-earning assets		221,231							225,610
Total assets	$	2,231,977						$	2,240,787
Interest-bearing liabilities:
Interest-bearing deposit accounts:
Interest-bearing demand deposits	$	661,415		402		0.24	%	$	667,152	$	389		0.23	%
Savings deposits		246,895		211		0.34			240,407		201		0.33
Time deposits		389,869		1,081		1.11			407,340		1,096		1.08
Total interest-bearing deposit accounts		1,298,179		1,694		0.52			1,314,899		1,686		0.51
Long-term borrowings:
FHLB advances		85,334		430		2.02			85,384		424		1.99
Obligations under capital lease		6,127		105		6.85			6,234		107		6.87
Junior subordinated debentures		92,616		1,161		5.01			92,786		707		3.05
Total borrowings		184,077		1,696		3.69			184,404		1,238		2.69
Total interest-bearing liabilities		1,482,256		3,390		0.91			1,499,303		2,924		0.78
Non-interest-bearing liabilities:
Non-interest-bearing demand deposits		409,694							402,949
Other liabilities		14,108							15,277
Total non-interest-bearing liabilities		423,802							418,226
Total liabilities		1,906,058							1,917,529

Shareholders' equity		325,919							323,258
Total liabilities and shareholders' equity	$	2,231,977						$	2,240,787
Net interest income			$	14,862						$	14,772
Interest rate spread ⁽³⁾						2.72	%						2.73	%
Net interest margin ⁽⁴⁾						2.96	%						2.93	%
Ratio of average interest-earning assets to average interest-bearing liabilities						136	%						134	%

	June 30, 2017		March 31, 2017		December 31, 2016		September 30, 2016		June 30, 2016
Tangible book value per common share:
Shareholders’ equity	$	325,060	$	322,816	$	319,709	$	265,878	$	264,172
Less: Intangible assets		38,188		38,188		38,188		38,188		38,188
Tangible equity	$	286,872	$	284,628	$	281,521	$	227,690	$	225,984
Common stock		19,134		19,132		19,031		19,026		19,026
Less: Treasury stock		73		75		108		138		172
Total outstanding shares		19,061		19,057		18,923		18,888		18,854
Tangible book value per common share:	$	15.05	$	14.94	$	14.88	$	12.05	$	11.99

	Three Months Ended
	June 30, 2017			March 31, 2017			December 31, 2016			September 30, 2016			June 30, 2016
Net income	$	1,455		$	1,430		$	56,000		$	1,630		$	2,963
Average tangible equity:
Average shareholders’ equity	$	325,919		$	323,258		$	267,542		$	266,931		$	262,517
Less: Average intangible assets		38,188			38,188			38,188			38,188			38,188
Average tangible equity	$	287,731		$	285,070		$	229,354		$	228,743		$	224,329
Return on average tangible equity⁽¹⁾:		2.0	%		2.0	%		97.7	%		2.9	%		5.3	%