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 June 30, 1996 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 3,355,668
Class Outstanding Shares At June 30, 1996
<PAGE>
SUN BANCORP, INC.
FORM 10-Q
PART I
Item 1. Financial Statements
<TABLE>
SUN BANCORP, INC.
CONSOLIDATED BALANCE SHEET
<CAPTION>
(In Thousands)
June 30, 1996 December 31, 1995
(Unaudited) (Unaudited)
<S> <C> <C>
ASSETS
Cash and due from banks $ 7,094 $ 6,055
Interest-bearing deposits in banks 471 416
Investment securities (Note 2) 120,635 107,125
Loans (net of unearned income of $5,218
and $5,074) (Notes 3 & 4) 212,095 202,103
Less: Deferred loan fees (533) (468)
Allowance for possible loan
losses (2,178) (2,191)
Net loans 209,384 199,444
Bank premises and equipment 4,590 4,247
Other real estate owned - -
Accrued interest and other assets 4,905 2,339
Total assets $347,079 $319,626
</TABLE>
The accompanying notes are an integral part of these financial statements.
<PAGE>
SUN BANCORP, INC.
FORM 10-Q
PART I
Item 1. Financial Statements
<TABLE>
SUN BANCORP, INC.
CONSOLIDATED BALANCE SHEET
<caption
(In Thousands)
June 30, 1996 December 31, 1995
(Unaudited) (Unaudited)
<S> <C> <C>
LIABILITIES & STOCKHOLDERS' EQUITY
Deposits: (Note 5)
Noninterest-bearing $ 21,750 $ 20,247
Interest-bearing 186,381 176,345
Total deposits $208,131 $196,592
Short-term borrowings: (Note 6)
Federal funds purchased and
securities sold under agreements
to repurchase $ 37,946 $ 15,526
Other borrowed funds 61,948 68,613
Accrued interest and other liabilities 2,988 2,875
Total liabilities $311,013 $283,606
Stockholders' Equity
Common Stock, Par value $1.25 $ 4,253 $ 4,053
Authorized 20,000,000 shares
Issued 3,403,177 shares in 1996
2,950,642 shares in 1995
Surplus 30,018 25,563
Retained earnings 3,362 6,417
Unrealized gains (losses) on available-for-sale
securities, net (158) 1,396
Less Treasury stock, At cost
47,509 Shares in 1996 and 1995 (1,409) (1,409)
Total stockholders' equity $ 36,066 $ 36,020
Total liabilities and
stockholders' equity $347,079 $319,626
</TABLE>
The accompanying notes are an integral part of these financial statements.
<PAGE>
SUN BANCORP, INC.
FORM 10-Q
PART I
Item 1. Financial Statements
<TABLE>
SUN BANCORP, INC.
CONSOLIDATED STATEMENT OF INCOME
<CAPTION>
(In Thousands)
For the Three Months For the Six Months
Ended June 30 Ended June 30
(Unaudited) (Unaudited)
1996 1995 1996 1995
<S> <C> <C> <C> <C>
Interest Income:
Interest and fees on loans $4,801 $4,525 $ 9,543 $ 8,708
Interest on deposits in banks 7 6 18 17
Interest and dividends on
investments:
U.S. Government and agency
obligations 1,352 1,139 2,643 2,294
Obligations of states and
political subdivisions 458 337 868 645
Other securities 122 110 222 224
Total interest income $6,740 $6,117 $13,294 $11,888
Interest Expense:
Interest on deposits $2,043 $1,858 $ 4,069 $ 3,403
Interest on short-term borrowings 398 195 442 653
Interest on other borrowed funds 960 1,002 1,035 1,763
Total interest expense $3,401 $3,055 $ 6,693 $ 5,819
Net interest income $3,339 $3,062 $ 6,601 $ 6,069
Provision for possible loan losses 75 120 150 240
Net interest income,
after provision for
possible loan losses $3,264 $2,942 $ 6,451 $ 5,829
</TABLE>
<PAGE>
SUN BANCORP, INC.
FORM 10-Q
PART I
Item 1. Financial Statements
<TABLE>
SUN BANCORP, INC.
CONSOLIDATED STATEMENT OF INCOME
(Continued)
<CAPTION>
(In Thousands)
For the Three Months For the Six Months
Ended June 30 Ended June 30
(Unaudited) (Unaudited)
1996 1995 1996 1995
<S> <C> <C> <C> <C>
Other Operating Income:
Trust income $ 69 $ 60 $ 139 $ 120
Service charges on deposit
accounts 126 132 248 252
Other income 154 159 271 263
Net security gains - 4 - 74
Income from insurance subsidiary 65 49 116 108
Total other operating income $ 414 $ 404 $ 774 817
Other Operating Expense:
Salaries and employee benefits $ 857 $ 830 $1,702 $1,640
Net occupancy expense 100 89 218 182
Furniture and equipment expenses 99 102 208 188
Other expenses 468 548 873 1,032
Expenses of insurance subsidiary 45 66 65 119
Total other operating expense $1,569 $1,635 $3,066 $3,161
Income before income taxes $2,109 $1,711 $4,159 $3,485
Income taxes 566 458 1,111 942
Net income $1,543 $1,253 $3,048 $2,543
PER SHARE DATA
Net Income $ .46 $ .37 $ .91 $ .75
Dividends Paid $ .23 $ .165 $ .44 $ .313
Weighted average number of
shares outstanding 3,352,431 3,355,160 3,352,431 3,354,760
</TABLE>
The accompanying notes are an integral part of these financial statements.
<PAGE>
SUN BANCORP, INC.
FORM 10-Q
PART I
Item 1. Financial Statements
<TABLE>
SUN BANCORP, INC.
CONSOLIDATED STATEMENT OF CASH FLOWS
<CAPTION>
(In Thousands) Six Months Ended
June 30
(Unaudited)
1996 1995
<S> <C> <C>
Cash flows from operating activities:
Net income $3,048 $2,543
Adjustments to reconcile net income to net cash
provided by operating activities:
Provision for possible loan losses 150 240
Provision for depreciation 191 161
Net security gains - (74)
(Increase) in accrued interest and
other assets (2,566) (619)
Increase (decrease) in accrued interest and
other liabilities 113 602
Net cash provided by operating activities 936 2,853
Cash flows from investing activities:
Proceeds from sales of available-for-sale securities - 4,295
Proceeds from maturities of available-for-sale
securities 10,865 12,321
Purchases of available-for-sale securities (25,930) (14,542)
Loans sold 2,493 856
Net increase in loan originations less principal
repayments (12,583) (11,604)
Capital expenditures (534) (58)
Net cash used in investing activities (25,689) (8,732)
Cash flows from financing activities:
Net increase in deposit accounts 11,539 13,171
Net (decrease) in short-term borrowings 22,420 (24,078)
Proceeds from other borrowed funds 7,500 30,400
Repayments of other borrowed funds (14,165) (8,406)
Cash dividends paid (1,484) (1,057)
Proceeds from sale of stock for employee
benefits program 37 20
Net cash provided by (used in) financing activities 25,847 10,050
Net increase (decrease) in cash and cash equivalents 1,094 4,171
Cash and cash equivalents at beginning of period 6,471 7,300
Cash and cash equivalents at end of period $ 7,565 $11,471
Supplemental disclosure of cash flow information:
Cash paid during the period for:
Interest paid $ 6,532 $ 5,429
Income taxes paid 1,200 1,075
</TABLE>
The accompanying notes are an integral part of these financial statements.
<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 six
month period ended June 30, 1996 are not necessarily indicative of the
results that may be expected for the year ending December 31, 1996.
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 1995 Annual Report to Stockholders.
<PAGE>
SUN BANCORP, INC.
FOR 10-Q
PART I
Item 1. Financial Statements
<TABLE>
SUN BANCORP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
<CAPTION>
Note 2 -- Investment Securities
(In Thousands)
June 30, 1996 December 31, 1995
Amortized Estimated Amortized Estimated
Cost Fair Value Cost Fair Value
(Unaudited) (Unaudited)
<S>
Available-for-sale securities:
Other obligations of U.S. <C> <C> <C> <C>
Government agencies $ 79,049 $ 77,436 $ 73,425 $ 73,358
Obligations of states and
political subdivisions 31,373 31,864 25,113 26,523
Corporate debt securities 36 36 242 242
Total debt securities 110,458 109,336 98,780 100,123
Equity securities 10,417 11,299 6,230 7,002
Total investment securities $120,875 $120,635 $105,010 $107,125
</TABLE>
Securities with a carrying value of $38,200,000 and $26,000,000 were pledged
to secure public deposits, trust deposits, securities sold under agreements
to repurchase, and other items required by law at June 30, 1996 and December
31, 1995, respectively.
<PAGE>
SUN BANCORP, INC.
FORM 10-Q
PART I
Item 1. Financial Statements
<TABLE>
SUN BANCORP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
<CAPTION>
Note 3 -- Loans
Major classifications of loans are as follows:
(In Thousands)
June 30, 1996 December 31, 1995
(Unaudited) (Unaudited)
<S> <C> <C>
Real estate loans $160,544 $149,475
Agricultural loans 976 724
Commercial and industrial loans 23,958 25,713
Loans to individuals 31,809 31,205
Other loans 26 60
Total Loans $209,384 $207,177
Less: Unearned income on loans (5,218) (5,074)
Deferred loan fees (533) (468)
Allowance for possible loan
losses (2,178) (2,191)
Net Loans $209,384 $199,444
</TABLE>
The following is a summary of the past due and nonaccrual loans:
<TABLE>
(In Thousands)
Past Due Past Due
June 30, 1996 30-89 Days 90 Days or More Nonaccrual
<S> <C> <C> <C>
Real estate loans $2,406 $1,661 $155
Loans to individuals 1,146 498 29
Commercial and all other loans 493 49 130
Total $4,045 $2,208 $314
December 31, 1995
Real estate loans $3,880 $1,391 $ -
Loans to individuals 1,283 341 -
Commercial and all other loans 563 257 -
Total $5,726 $1,989 $ -
</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
<CAPTION>
(In Thousands)
June 30, 1996 December 31, 1995
(Unaudited) (Unaudited)
<S> <C> <C>
Beginning balance $2,191 $1,999
Loans charged off 170 176
Recoveries of loans previously
charged off 7 8
Provision for possible loan losses 150 360
Ending balance $2,178 $2,191
</TABLE>
Note 5 -- Deposits
<TABLE>
<CAPTION>
(In Thousands)
June 30, 1996 December 31, 1995
(Unaudited) (Unaudited)
<S> <C> <C>
Demand deposits $ 21,750 $ 20,247
NOW Accounts 32,363 31,102
Insured Money Market Accounts 10,049 6,653
Savings deposits 31,245 28,136
Time Certificates of Deposit
of $100,000 or more 15,433 14,402
Other time deposits 97,291 96,052
Total deposits $208,131 $196,592
</TABLE>
<PAGE>
SUN BANCORP, INC.
FORM 10-Q
PART I
Item 1. Financial Statements
<TABLE>
SUN BANCORP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
<CAPTION>
Note 6 -- Borrowed Funds
(In Thousands)
June 30,1996 December 31, 1995
(Unaudited) (Unaudited)
Daily Daily
Actual At Average Actual At Average
June 30 Outstanding December 31 Outstanding
<S> <C> <C> <C> <C>
Short-term borrowings $37,946 $27,615 $15,526 $18,298
Other borrowed funds 61,948 67,661 68,613 63,786
Total borrowed funds $99,894 $95,276 $84,139 $82,084
</TABLE>
Note 7 -- Standby Letters of Credit and Loan Commitments
Outstanding letters of credit amounted to $1,293,000 and $1,366,000 at June
30, 1996 and December 31, 1995, respectively.
Commitments to extend credit totaled $37,991,000 at June 30, 1996 and
$33,784,000 as of December 31, 1995.
<PAGE>
SUN BANCORP, INC.
FORM 10-Q
PART I
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations
SUMMARY
Once again, SUN BANCORP, INC. (SUN) achieved record profits through June
30, 1996 as net income reached $3,048,000 compared to the $2,543,000 earned
through June 30, 1995, a 20% increase. Earnings per share increased $.16 or 21%
from the $.75 earned during the same period in 1996. SUN's strong earnings per-
formance is further reflected through a strong 1.82% return on average assets
and 16.89% return on average equity. At June 30, 1995, these ratios were 1.67%
and 16.84%, respectively.
During the second quarter of 1996, SUN recorded net income of $1,543,000
compared to the $1,253,000 earned in the same period of 1995, a 23% increase.
Earnings per share for the three months ended June 30, 1996 and 1995 were $.46
and $.37, respectively. Much of the increase in net income for the quarter is
due to the rise in net interest income of $277,000 or 9% from $3,062,000 in 1995
to $3,339,000.
At June 30, 1996, the provision for loan losses was $150,000 compared to
$240,000 at June 30, 1995. SUN has experienced steady loan growth for several
years and its assset quality has remained strong. It is SUN's desire to main-
tain the allowance for possible loan losses at a level of 1% of total loans.
OTHER OPERATING INCOME
Other operating income decreased $43,000 from $817,000 at June 30, 1995 to
$774,000 at June 30, 1996. However, excluding net security gains, other operat-
ing income rose $31,000 in 1996. In 1995, SUN recognized $76,000 in net
security gains from the sale of municipal securities. SUN has not sold any in-
vestments in 1996.
OTHER OPERATING EXPENSES
Total other operating expenses actually decreased $95,000 or 3% from
$3,161,000 at June 30, 1996 to $3,066,000 at June 30, 1996. As mentioned in
previous reports, the Federal Deposit Insurance Corporation drastically reduced
its insurance premiums which contributed to the decrease in other operating
expenses. The increases in net occupancy and furniture and equipment expenses
are due to the installation of new computer hardware and software as well as
preparing our new branch locations for operation. It is the intention of SUN's
management to control overhead expenses.
STATEMENT OF CONDITION
Total assets were $347,079,000 at June 30, 1996 compared to $315,159,000 in
1995, a $31,920,000 or 10% increase. This increase was the result of strong
deposit growth and additional borrowed funds through the Federal Home Loan Bank
of Pittsburgh. These deposits and borrowings were used to fund the loan growth
of $13,919,000 and the $19,295,000 increase in investment securities. The in-
vestment portfolio is mainly comprised of mortgage-backed securities and state
and municipal bonds. Deposits rose $11,800,000 with much of the growth occur-
ring in time deposits. Total borrowed funds increased $16,304,000 as a result
of the increased loan demand. Stockholders' equity remains strong at
$36,066,000 resulting in a capital to asset ratio in excess of 10%. SUN is com-
mitted to providing its shareholders with the highest possible return on their
investment.
<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
had a 5% stock dividend and paid a $.23 per share cash dividend to its stock-
holders on June 7, 1996. 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 Standards June 30, 1996 December 31, 1995
<S> <C> <C> <C>
Core capital ratio 4.00% 16.94% 18.47%
Risk-based capital ratio 8.00 17.96 19.59
Leverage ratio 3.00 10.39 11.27
</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
On August 5, 1996, the Board of Directors authorized the 18th consecutive
increase in the quarterly dividend to $.24 per share payable September 13, 1996
to stockholders of record August 30, 1996.
Item 6 -- Exhibits and Reports on Form 8-K
a. No reports on Form 8-K were filed for the quarter ending June 30,
1996.
<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 8/14/96 /s/ Fred W. Kelly, Jr.
Chief Executive Officer
(Principal Executive Officer)
/s/ Jeffrey E. Hoyt
Sr. 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> 1000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-END> JUN-30-1996
<CASH> 7094
<INT-BEARING-DEPOSITS> 471
<FED-FUNDS-SOLD> 0
<TRADING-ASSETS> 0
<INVESTMENTS-HELD-FOR-SALE> 120635
<INVESTMENTS-CARRYING> 0
<INVESTMENTS-MARKET> 0
<LOANS> 212095
<ALLOWANCE> 2178
<TOTAL-ASSETS> 347079
<DEPOSITS> 208131
<SHORT-TERM> 37946
<LIABILITIES-OTHER> 2988
<LONG-TERM> 61948
<COMMON> 4253
0
0
<OTHER-SE> 31813
<TOTAL-LIABILITIES-AND-EQUITY> 347079
<INTEREST-LOAN> 9543
<INTEREST-INVEST> 3733
<INTEREST-OTHER> 18
<INTEREST-TOTAL> 13294
<INTEREST-DEPOSIT> 4069
<INTEREST-EXPENSE> 6693
<INTEREST-INCOME-NET> 6601
<LOAN-LOSSES> 150
<SECURITIES-GAINS> 0
<EXPENSE-OTHER> 3066
<INCOME-PRETAX> 4159
<INCOME-PRE-EXTRAORDINARY> 3048
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 3048
<EPS-PRIMARY> .91
<EPS-DILUTED> .91
<YIELD-ACTUAL> 3.97
<LOANS-NON> 314
<LOANS-PAST> 2208
<LOANS-TROUBLED> 0
<LOANS-PROBLEM> 0
<ALLOWANCE-OPEN> 2191
<CHARGE-OFFS> 170
<RECOVERIES> 7
<ALLOWANCE-CLOSE> 2178
<ALLOWANCE-DOMESTIC> 2178
<ALLOWANCE-FOREIGN> 0
<ALLOWANCE-UNALLOCATED> 901
</TABLE>
