SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
QUARTERLY REPORT UNDER SECTION 13 OR 15 (d) OF
THE SECURITIES EXCHANGE ACT OF 1934
For The Quarter Ended September 30, 1995 Commission File Number: 0-14745
SUN BANCORP, INC. (SUN)
(Exact name of registrant as specified in its charter)
Pennsylvania 23-2233584
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
P.O. Box 57, Selinsgrove, Pennsylvania 17870
(Address of principal executive offices) (Zip code)
Registrant's telephone number, including area code (717)374-1131
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act
of 1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to
such filing requirements for the past 90 days.
YES X NO
Indicate the number of shares outstanding of each of the issuer's classes of
Common Stock, as of the latest practicable date.
Common Stock, $1.25 Par Value 2,903,891
Class Outstanding Shares At
September 30, 1995
<PAGE>
SUN BANCORP, INC.
FORM 10-Q
PART I
Item 1. Financial Statements
<TABLE>
SUN BANCORP, INC.
CONSOLIDATED BALANCE SHEET
(In Thousands)
<CAPTION>
September 30, 1995 December 31, 1994
(Unaudited) (Unaudited)
<S> <C> <C>
ASSETS
Cash and due from banks $ 8,150 $ 7,123
Interest-bearing deposits in banks 307 177
Investment securities (Note 2) 102,105 100,002
Loans (net of unearned income of $5,128
and $4,679) (Notes 3 & 4) 197,052 187,456
Less: Deferred loan fees (496) (500)
Allowance for possible loan
losses (2,169) (1,999)
-------- --------
Net loans 194,387 184,957
Bank premises and equipment 3,604 3,538
Other real estate owned - -
Accrued interest and other assets 2,954 3,964
-------- --------
Total assets $311,507 $299,761
======== ========
Deposits: (Note 5)
Noninterest-bearing $ 20,028 $ 22,354
Interest-bearing 176,516 160,806
-------- --------
Total deposits $196,544 $183,160
======== ========
Short-term borrowings: (Note 6)
Federal funds purchased and
securities sold under agreements
to repurchase $ 13,539 $ 34,702
Other borrowed funds 64,892 50,972
Accrued interest and other
liabilities 2,702 2,173
-------- --------
Total liabilities $277,677 $271,007
======== ========
Stockholders' Equity
Common Stock, Par value $1.25
Authorized 6,000,000 shares
Issued 2,951,400 shares in 1995
1,890,331 shares in 1994 $ 3,688 $ 3,515
Surplus 18,288 15,212
Retained earnings 13,186 13,932
Unrealized gains (losses) on
available-for-sale securities, net 77 (2,496)
Less Treasury stock, At cost
47,509 Shares at September 30,
1995 and December 31, 1994 (1,409) (1,409)
--------- ---------
Total stockholders' equity $ 33,830 $ 28,754
========= =========
Total liabilities and
stockholders' equity $311,507 $299,761
========= =========
<FN>
The accompanying notes are an integral part of these financial statements.
</TABLE>
<PAGE>
SUN BANCORP, INC.
FORM 10-Q
PART I
Item 1. Financial Statements
<TABLE>
SUN BANCORP, INC.
CONSOLIDATED STATEMENT OF INCOME
(In Thousands, Except Per Share Data)
<CAPTION>
For the Three Months For the Nine Months
Ended September 30 Ended September 30
(Unaudited) (Unaudited)
1995 1994 1995 1994
<S> <C> <C> <C> <C>
Interest Income:
Interest and fees on loans $4,537 $3,705 $13,252 $10,737
Interest on deposits in banks 105 1 115 3
Interest and dividends on
investments:
U.S. Government and agency
obligations 1,161 1,049 3,455 3,221
Obligations of states and
political subdivision 340 269 985 829
Other securities 100 102 324 334
------ ------ ------- -------
Total interest income $6,243 $5,126 $18,131 $15,124
====== ====== ======= =======
Interest Expense:
Interest on deposits $1,960 $1,451 $ 5,363 $ 4,224
Interest on short-term
borrowings 107 260 760 702
Interest on other borrowed
funds 1,044 506 2,807 1,541
------ ------ ------- -------
Total interest expense $3,111 $2,217 $ 8,930 $ 6,467
====== ====== ======= =======
Net interest income $3,132 $2,909 $ 9,201 $ 8,657
Provision for possible
loan losses 60 90 300 270
Net interest income,
after provision for
possible loan losses $3,072 $2,819 $ 8,901 $8,387
Other Operating Income:
Trust income $ 60 $ 54 $ 180 $ 175
Service charges on deposit
accounts 131 120 383 351
Other income 171 117 434 305
Net security gains 56 1 130 52
Income from insurance
subsidiary 24 58 132 278
------ ------ ------ ------
Total other operating income $ 442 $ 350 $1,259 $1,161
====== ====== ====== ======
Other Operating Expense:
Salaries and employee benefits $ 799 $ 787 $2,439 $2,321
Net occupancy expense 93 84 275 286
Furniture and equipment expenses 107 117 295 338
Other expenses 340 462 1,372 1,390
Expenses of insurance subsidiary - 29 119 253
------ ------ ------ ------
Total other operating expense $1,339 $1,479 $4,500 $4,588
====== ====== ====== ======
Income before income taxes $2,175 $1,690 $5,660 $4,960
Income taxes 612 451 1,554 1,371
------ ------ ------ ------
Net income $1,563 $1,239 $4,106 $3,589
====== ====== ====== ======
PER SHARE DATA
Net Income $ .54 $ .43 $ 1.41 $ 1.24
Dividends Paid $ 582 $ 461 $1,639 $1,318
Weighted average number of
shares outstanding 2,903,891 2,902,445 2,903,891 2,902,445
<FN>
The accompanying notes are an integral part of these financial statements.
</TABLE>
<PAGE>
SUN BANCORP, INC.
FORM 10-Q
PART I
Item 1. Financial Statements
<TABLE>
SUN BANCORP, INC.
CONSOLIDATED STATEMENT OF CASH FLOWS
(In Thousands)
<CAPTION>
Nine Months Ended
September 30
(Unaudited)
1995 1994
<S> <C> <C>
Cash flows from operating activities:
Net income $4,106 $3,589
Adjustments to reconcile net income to net cash
provided by operating activities:
Provision for possible loan losses 300 270
Provision for depreciation 243 296
Net security gains (130) (52)
Realized net gain from sale of fixed assets - (5)
(Increase) in accrued interest and
other assets (315) (1,504)
Increase (decrease) in accrued interest and
other liabilities 529 (62)
------ -------
Net cash provided by operating activities 4,733 2,532
====== =======
Cash flows from investing activities:
Proceeds from sales of available-for-sale
securities 4,383 249
Proceeds from maturities of available-for-sale
securities 17,952 30,680
Purchases of available-for-sale securities (20,410) (21,104)
Loans sold 2,396 3,931
Net increase in loan originations less principal
repayments (12,126) (17,293)
Proceeds from sale of fixed assets - 92
Capital expenditures (309) (62)
--------- --------
Net cash used in investing activities (8,114) (3,507)
========= ========
Cash flows from financing activities:
Net increase in deposit accounts 13,384 5,819
Net (decrease) in short-term borrowings (21,163) (4,037)
Proceeds from other borrowed funds 30,400 10,600
Repayments of other borrowed funds (16,480) (7,972)
Cash dividends paid (1,639) (1,318)
Proceeds from sale of stock for employee
benefits program 36 -
Net cash provided by (used in) financing ------ ------
activities 4,538 3,092
====== ======
Net increase (decrease) in cash and cash equivalents $1,157 $2,117
Cash and cash equivalents at beginning of period 7,300 5,835
------ ------
Cash and cash equivalents at end of period $8,457 $7,952
====== ======
Supplemental disclosure of cash flow information:
Cash paid during the period for:
Interest paid $8,652 $6,422
Income taxes paid 1,550 1,535
<FN>
The accompanying notes are an integral part of these financial statements.
</TABLE>
<PAGE>
SUN BANCORP, INC.
FORM 10-Q
PART I
Item 1. Financial Statements
SUN BANCORP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
Note 1 -- Basis of Presentation
The consolidated financial statements include the accounts of SUN BANCORP,
INC. and subsidiaries, Sun bank and the Pennsylvania SUN Life Insurance
Company. All material intercompany balances and transactions have been
eliminated in consolidation.
The accompanying unaudited consolidated financial statements for the
interim periods do not include all of the information and footnotes required by
generally accepted accounting principles. However, in the opinion of
management, all adjustments necessary for a fair presentation of the results of
the interim period have been included. Operating results for the nine month
period ended September 30, 1995 are not necessarily indicative of the results
that may be expected for the year ending December 31, 1995.
The accounting policies followed in the presentation of interim financial
results are the same as those followed on an annual basis. These policies are
presented on page 8 of the 1994 Annual Report to Stockholders.
<PAGE>
SUN BANCORP, INC.
FORM 10-Q
PART I
Item 1. Financial Statements
<TABLE>
SUN BANCORP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Note 2 -- Investment Securities
(In Thousands)
<CAPTION>
September 30, 1995 December 31, 1994
Amortized Estimated Amortized Estimated
Cost Fair Value Cost Fair Value
(Unaudited) (Unaudited)
<S> <C> <C> <C> <C>
Available-for-sale securities:
Other obligations of U.S.
Government agencies $ 72,950 $ 71,921 $ 76,254 $ 72,882
Obligations of states and
political subdivisions 23,003 23,538 19,851 19,340
Corporate debt securities 402 402 1,503 1,492
-------- -------- -------- --------
Total debt securities 96,355 95,861 97,608 93,714
Equity securities 5,635 6,244 6,177 6,288
-------- -------- -------- --------
Total investment securities $101,990 $102,105 $103,785 $100,002
======== ======== ======== ========
</TABLE>
Securities with a carrying value of $26,973,000 and $27,600,000 were pledged to
secure public deposits, trust deposits, securities sold under agreements to
repurchase, and other items required by law at September 30, 1995 and December
31, 1994, respectively.
<PAGE>
SUN BANCORP, INC.
FORM 10-Q
PART I
Item 1. Financial Statements
<TABLE>
SUN BANCORP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Note 3 -- Loans
Major classifications of loans are as follows:
(In Thousands)
<CAPTION>
September 30, 1995 December 31, 1994
(Unaudited) (Unaudited)
<S> <C> <C>
Real estate loans $146,535 $140,341
Agricultural loans 749 665
Commercial and industrial loans 23,027 20,703
Loans to individuals 31,849 30,384
Other loans 20 42
-------- --------
Total Loans $202,180 $192,135
Less: Unearned income on loans (5,128) (4,679)
Deferred loan fees (496) (500)
Allowance for possible loan
losses (2,169) (1,999)
--------- ---------
Net Loans $194,387 $184,957
========= =========
</TABLE>
The following is a summary of the past due and nonaccrual loans:
<TABLE>
(In Thousands)
<CAPTION>
Past Due Past Due
30-89 Days 90 Days or More Nonaccrual
<C> <C> <C>
September 30, 1995
Real estate loans $3,095 $716 $ -
Loans to individuals 912 144 -
Commercial and all other loans 350 41 -
------ ---- ----
Total $4,357 $901 $ -
====== ==== ====
December 31, 1994
Real estate loans $3,117 $394 $ 43
Loans to individuals 949 65 -
Commercial and all other loans 513 29 120
------ ----- -----
Total $4,579 $ 488 $163
====== ===== =====
</TABLE>
<PAGE>
SUN BANCORP, INC.
FORM 10-Q
PART I
Item 1. Financial Statements
<TABLE>
SUN BANCORP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Note 4 -- Allowance for Possible Loan Losses
(In Thousands)
<CAPTION>
September 30, 1995 December 31, 1994
(Unaudited) (Unaudited)
<S> <C> <C>
Beginning balance $1,999 $1,732
Loans charged off 136 110
Recoveries of loans previously
charged off 6 17
Provision for possible loan losses 300 360
------ ------
Ending balance $2,169 $1,999
====== ======
</TABLE>
<TABLE>
Note 5 -- Deposits
(In Thousands)
<CAPTION>
September 30, 1995 December 31, 1994
(Unaudited) (Unaudited)
<S> <C> <C>
Demand deposits $ 20,028 $ 22,354
NOW Accounts 30,328 32,225
Insured Money Market Accounts 5,877 6,361
Savings deposits 30,830 29,974
Time Certificates of Deposit
of $100,000 or more 13,391 9,854
Other time deposits 96,090 82,392
-------- --------
Total deposits $196,544 $183,160
======== ========
</TABLE>
<PAGE>
SUN BANCORP, INC.
FORM 10-Q
PART I
Item 1. Financial Statements
<TABLE>
SUN BANCORP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Note 6 -- Borrowed Funds
(In Thousands)
<CAPTION>
September 30, 1995 December 31, 1994
(Unaudited) (Unaudited)
Daily Daily
Actual At Average Actual At Average
September 30 Outstanding December 31 Outstanding
<S> <C> <C> <C> <C>
Short-term borrowings $13,539 $19,077 $34,702 $25,473
Other borrowed funds 64,892 64,338 50,972 43,897
------- ------- ------- -------
Total borrowed funds $78,431 $83,415 $85,674 $69,370
======= ======= ======= =======
</TABLE>
Note 7 -- Standby Letters of Credit and Loan Commitments
Outstanding letters of credit amounted to $1,451,000 and $1,490,000 at
September 30, 1995 and December 31, 1994, respectively.
Commitments to extend credit totaled $33,721,000 at September 30, 1995 and
$34,825,000 as of December 31, 1994.
<PAGE>
SUN BANCORP, INC.
FORM 10-Q
PART I
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations
SUMMARY
SUN BANCORP, INC. continued its outstanding earnings performance through
September 30, 1995 as net income reached $4,106,000, representing a 14%
increase over the $3,589,000 profit at September 30, 1994. The earnings per
share of $1.41 achieved at September 30, 1995 represents a 14% increase over
the $1.24 recorded for the same period in 1994. SUN's strong earnings per-
formance is further reflected through a 1.78% return on average assets and a
17.50% return on average equity. At September 30, 1994, these ratios were
1.70% and 16.50%, respectively.
For the third quarter of 1995, SUN achieved record net income of
$1,563,000 compared to the $1,239,000 recorded in the third quarter of 1994,
resulting in a 26% increase. Furthermore, the earnings per share of $.54
recorded for the quarter represents a 26% increase over the $.43 earned in
the third quarter of 1994. Net interest income rose $223,000 or 8% from the
$2,909,000 achieved in the third quarter of 1994 to $3,132,000 recorded in
the same period for 1995.
The provision for loan losses increased slightly from $270,000 in 1994 to
$300,000 in 1995. SUN's loan demand has been steady and its asset quality has
remained well above the industry average. It is management's desire to keep
the allowance for possible loan losses in excess of 1% of total loans.
OTHER OPERATING INCOME
Other operating income, excluding income from insurance premiums for
comparison purposes, increased $98,000 or 8%. SUN recognized $130,000 in net
security gains on sales of municipal bonds and equity securities. In 1994, the
$52,000 realized in security gains was from sales of equity securities.
Management does not use sales from the investment portfolio as a means to
inflate income. During the third quarter of 1995, other income rose $54,000 or
46% as a result of an increase in loan service charges due to volume and
miscellaneous deposit service charges.
OTHER OPERATING EXPENSES
Total other operating expenses, again excluding the operating expenses of
the insurance subsidiary for comparison purposes, rose a slight 1%. In total,
net occupancy and furniture and equipment expense decreased $54,000 or 9% from
September 30, 1994 to September 30, 1995 as a result of a general decline in
related costs. In September 1995, SUN received a refund of $117,000 from the
Federal Deposit Insurance Corporation (FDIC) representing an adjustment to its
deposit insurance premiums for the second and third quarters of 1995. The FDIC
lowered the assessment rates for well-capitalized banks from $.23 per one
hundred dollars in deposits to $.04 per one hundred effective the second
quarter of 1995. Consequently, other operating expenses for the third
quarter of 1995 dropped $122,000 or 26% from $462,000 in 1994 to $340,000 in
1995. SUN is committed to controlling its overhead costs.
STATEMENT OF CONDITION
SUN experienced a 7% increase in assets from $292,221,000 in 1994 to
$311,507,000 in 1995. Loans grew $15,555,000 and investments rose $3,627,000.
Deposits rose $11,262,000 while total other borrowings increased $2,502,000.
The increases in deposits and other borrowings were used primarily to fund new
loans. SUN's capital to asset ratio is in excess of 10% reflecting its strong
capital base.
<PAGE>
SUN BANCORP, INC.
FORM 10-Q
PART I
Item 2. Management's Discussion and Analysis of Financial Condition and Results
of Operations
CAPITAL ADEQUACY
Management believes capital is being maintained at adequate levels.
SUN's stock is traded publicly on the NASDAQ national market system under the
symbol SUBI. SUN's strong capital position is evidenced by the following
capital ratios which are well above the regulatory minimum levels.
<TABLE>
<CAPTION>
Regulatory September 30 December 31
Standards 1995 1994
<S> <C> <C> <C>
Core capital ratio 4.00% 18.04% 15.64%
Risk-based capital ratio 8.00 19.20 16.73
Leverage ratio 3.00 10.86 9.59
</TABLE>
<PAGE>
SUN BANCORP, INC.
FORM 10-Q
PART II
Items 1, 2, 3 and 4 -- Omitted pursuant to instructions to Part II
Item 5 -- Other information
In September 1995, SUN acquired land in Northumberland, Pennsylvania for
the purpose of building a branch bank. An application will be filed with the
Pennsylvania Department of Banking with a planned opening in mid-1996.
In October 1995, SUN formed a limited partnership with Mifflin Place
Associates, a low-income housing project for the elderly in Mifflinburg,
Pennsylvania. SUN BANCORP, INC. will provide the capital to the project which
enables us to receive investment tax credits.
On November 6, 1995, SUN's Board of Directors authorized a 10% stock
dividend and a $.21 per share cash dividend for stockholders of record
December 1, 1995 payable December 15, 1995.
Item 6 -- Exhibits and Reports on Form 8-K
a. Exhibits - None
b. No reports on Form 8-K were filed for the quarter ending
September 30, 1995.
<PAGE>
SUN BANCORP, INC.
FORM 10-Q
PART II
SIGNATURES
Pursuant to the requirement of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
SUN BANCORP, INC.
Date: /s/Fred W. Kelly, Jr.
Chief Executive Officer
(Principal Executive Officer)
Date: /s/Jeffrey E. Hoyt
Vice President & Chief Financial Officer
(Principal Financial Officer and
Principal Accounting Officer)
SUN BANCORP, INC.
P.O. Box 57
Selinsgrove, PA 17870
(717)374-1131
<TABLE> <S> <C>
<ARTICLE> 9
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-END> SEP-30-1995
<CASH> 8,150
<INT-BEARING-DEPOSITS> 307
<FED-FUNDS-SOLD> 0
<TRADING-ASSETS> 0
<INVESTMENTS-HELD-FOR-SALE> 102,105
<INVESTMENTS-CARRYING> 0
<INVESTMENTS-MARKET> 0
<LOANS> 196,556
<ALLOWANCE> 2,169
<TOTAL-ASSETS> 311,507
<DEPOSITS> 196,544
<SHORT-TERM> 13,539
<LIABILITIES-OTHER> 6,702
<LONG-TERM> 64,892
<COMMON> 3,688
0
0
<OTHER-SE> 30,142
<TOTAL-LIABILITIES-AND-EQUITY> 311,507
<INTEREST-LOAN> 13,252
<INTEREST-INVEST> 4,764
<INTEREST-OTHER> 115
<INTEREST-TOTAL> 18,131
<INTEREST-DEPOSIT> 5,363
<INTEREST-EXPENSE> 8,930
<INTEREST-INCOME-NET> 9,201
<LOAN-LOSSES> 300
<SECURITIES-GAINS> 130
<EXPENSE-OTHER> 4,500
<INCOME-PRETAX> 5,660
<INCOME-PRE-EXTRAORDINARY> 5,660
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 4,106
<EPS-PRIMARY> 1.41
<EPS-DILUTED> 1.41
<YIELD-ACTUAL> 4.18
<LOANS-NON> 0
<LOANS-PAST> 901
<LOANS-TROUBLED> 0
<LOANS-PROBLEM> 0
<ALLOWANCE-OPEN> 1,999
<CHARGE-OFFS> 136
<RECOVERIES> 6
<ALLOWANCE-CLOSE> 2,169
<ALLOWANCE-DOMESTIC> 2,169
<ALLOWANCE-FOREIGN> 0
<ALLOWANCE-UNALLOCATED> 769
</TABLE>
