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 March 31, 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 3,194,424
Class Outstanding Shares At March 31, 1996
<PAGE>
SUN BANCORP, INC.
FORM 10-Q
PART I
Item 1. Financial Statements
<TABLE>
SUN BANCORP, INC.
CONSOLIDATED BALANCE SHEET
<CAPTION>
(In Thousands)
March 31, 1996 December 31, 1995
(Unaudited) (Unaudited)
<S> <C> <C>
ASSETS
Cash and due from banks $ 6,875 $ 6,055
Interest-bearing deposits in banks 544 416
Investment securities (Note 2) 122,956 107,125
Loans (net of unearned income of $5,120
and $5,074) (Notes 3 & 4) 207,183 202,103
Less: Deferred loan fees (449) (468)
Allowance for possible loan
losses (2,194) (2,191)
Net loans 204,540 199,444
Bank premises and equipment 4,505 4,247
Other real estate owned 25 -
Accrued interest and other assets 3,621 2,339
Total assets $343,066 $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)
March 31, 1996 December 31, 1995
(Unaudited) (Unaudited)
<S> <C> <C>
LIABILITIES & STOCKHOLDERS' EQUITY
Deposits: (Note 5)
Noninterest-bearing $ 19,736 $ 20,247
Interest-bearing 183,174 176,345
Total deposits $202,910 $196,592
Short-term borrowings: (Note 6)
Federal funds purchased and
securities sold under agreements
to repurchase $ 40,813 $ 15,526
Other borrowed funds 61,340 68,613
Accrued interest and other liabilities 2,921 2,875
Total liabilities $307,984 $283,606
Stockholders' Equity
Common Stock, Par value $1.25 $ 4,053 $ 4,053
Authorized 20,000,000 shares
Issued 3,241,933 shares in 1996
3,241,757 shares in 1995
Surplus 25,567 25,563
Retained earnings 7,219 6,417
Unrealized gains (losses) on available-for-sale
securities, net (348) 1,396
Less Treasury stock, At cost
47,509 Shares in 1996 and 1995 (1,409) (1,409)
Total stockholders' equity $ 35,082 $ 36,020
Total liabilities and
stockholders' equity $343,066 $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
Ended March 31
(Unaudited)
1996 1995
<S> <C> <C>
Interest Income:
Interest and fees on loans $4,742 $4,190
Interest on deposits in banks 11 4
Interest and dividends on
investments:
U.S. Government and agency
obligations 1,291 1,155
Obligations of states and
political subdivisions 410 308
Other securities 100 114
Total interest income $6,554 $5,771
Interest Expense:
Interest on deposits $2,026 $1,545
Interest on short-term borrowings 227 458
Interest on other borrowed funds 1,039 761
Total interest expense $3,292 $2,764
Net interest income $3,262 $3,007
Provision for possible loan losses 75 120
Net interest income,
after provision for
possible loan losses $3,187 $2,887
</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
Ended March 31
(Unaudited)
1996 1995
<S> <C> <C>
Other Operating Income:
Trust income $ 70 $ 60
Service charges on deposit
accounts 122 120
Other income 117 104
Net security gains - 70
Income from insurance subsidiary 51 59
Total other operating income $ 360 $ 413
Other Operating Expense:
Salaries and employee benefits $ 845 $ 810
Net occupancy expense 118 93
Furniture and equipment expenses 109 86
Other expenses 405 484
Expenses of insurance subsidiary 20 53
Total other operating expense $ 1,497 $1,526
Income before income taxes $ 2,050 $1,774
Income taxes 545 484
Net income $ 1,505 $1,290
PER SHARE DATA
Net Income $ .46 $ .40
Dividends Paid $ .22 $ .156
Weighted average number of
shares outstanding 3,194,336 3,192,981
</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) Three Months Ended
March 31
(Unaudited)
1996 1995
<S> <C> <C>
Cash flows from operating activities:
Net income $1,505 $1,290
Adjustments to reconcile net income to net cash
provided by operating activities:
Provision for possible loan losses 75 120
Provision for depreciation 95 80
Net security gains - (70)
(Increase) in accrued interest and
other assets (1,307) 76
Increase (decrease) in accrued interest and
other liabilities 46 115
Net cash provided by operating activities 414 1,611
Cash flows from investing activities:
Proceeds from sales of available-for-sale securities - 4,229
Proceeds from maturities of available-for-sale
securities 3,098 8,232
Purchases of available-for-sale securities (20,672) (9,542)
Loans sold 973 422
Net increase in loan originations less principal
repayments (6,144) (9,284)
Capital expenditures (353) (7)
Net cash used in investing activities (23,098) (5,950)
Cash flows from financing activities:
Net increase in deposit accounts 6,318 3,128
Net (decrease) in short-term borrowings 25,287 (12,129)
Proceeds from other borrowed funds 7,500 20,000
Repayments of other borrowed funds (14,773) (6,743)
Cash dividends paid (704) (497)
Proceeds from sale of stock for employee
benefits program 4 7
Net cash provided by (used in) financing activities 23,632 3,766
Net increase (decrease) in cash and cash equivalents 948 (573)
Cash and cash equivalents at beginning of period 6,471 7,300
Cash and cash equivalents at end of period $ 7,419 $ 6,727
Supplemental disclosure of cash flow information:
Cash paid during the period for:
Interest paid $ 3,320 $ 2,698
Income taxes paid 575 550
</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 three
month period ended March 31, 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)
March 31, 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 $ 87,488 $ 85,474 $ 73,425 $ 73,358
Obligations of states and
political subdivisions 28,582 29,135 25,113 26,523
Corporate debt securities 143 143 242 242
Total debt securities 116,213 114,752 98,780 100,123
Equity securities 7,270 8,204 6,230 7,002
Total investment securities $123,483 $122,956 $105,010 $107,125
</TABLE>
Securities with a carrying value of $32,300,000 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 March 31, 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)
March 31, 1996 December 31, 1995
(Unaudited) (Unaudited)
<S> <C> <C>
Real estate loans $151,565 $149,475
Agricultural loans 891 724
Commercial and industrial loans 27,858 25,713
Loans to individuals 31,957 31,205
Other loans 32 60
Total Loans $212,303 $207,177
Less: Unearned income on loans (5,120) (5,074)
Deferred loan fees (449) (468)
Allowance for possible loan
losses (2,194) (2,191)
Net Loans $204,540 $199,444
</TABLE>
The following is a summary of the past due and nonaccrual loans:
<TABLE>
(In Thousands)
Past Due Past Due
March 31, 1996 30-89 Days 90 Days or More Nonaccrual
<S> <C> <C> <C>
Real estate loans $ 2,986 $ 2,167 $ -
Loans to individuals 1,307 543 -
Commercial and all other loans 312 253 -
Total $ 4,605 $ 2,963 $ -
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)
March 31, 1996 December 31, 1995
(Unaudited) (Unaudited)
<S> <C> <C>
Beginning balance $2,191 $1,999
Loans charged off 72 176
Recoveries of loans previously
charged off - 8
Provision for possible loan losses 75 360
Ending balance $2,194 $2,191
</TABLE>
Note 5 -- Deposits
<TABLE>
<CAPTION>
(In Thousands)
March 31, 1996 December 31, 1995
(Unaudited) (Unaudited)
<S> <C> <C>
Demand deposits $ 19,736 $ 20,247
NOW Accounts 31,628 31,102
Insured Money Market Accounts 10,347 6,653
Savings deposits 30,141 28,136
Time Certificates of Deposit
of $100,000 or more 14,895 14,402
Other time deposits 96,163 96,052
Total deposits $202,910 $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)
March 31,1996 December 31, 1995
(Unaudited) (Unaudited)
Daily Daily
Actual At Average Actual At Average
March 31 Outstanding December 31 Outstanding
<S> <C> <C> <C> <C>
Short-term borrowings $ 40,813 $24,232 $ 15,526 $ 18,298
Other borrowed funds 61,340 65,926 68,613 63,786
Total borrowed funds $102,153 $90,158 $ 84,139 $ 82,084
</TABLE>
Note 7 -- Standby Letters of Credit and Loan Commitments
Outstanding letters of credit amounted to $1,055,000 and $1,366,000 at March
31, 1996 and December 31, 1995, respectively.
Commitments to extend credit totaled $32,693,000 at March 31, 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
SUN BANCORP, INC. continued to achieve record profits in the first
quarter of 1996. Net income at March 31, 1996 was $1,505,000 compared to
$1,290,000 at March 31, 1995, a 16.7% increase. Earnings per share rose 15.0%
from the $.40 recorded in the first quarter of 1995 to $.46 for the first
quarter of 1996. SUN achieved a 1.82% return on average assets and a 16.51%
return on average equity. In the first quarter of 1995, these ratios were 1.72%
and 17.63% respectively.
NET INTEREST INCOME
The primary source of income for SUN is net interest income, which is the
difference between interest and fees on earning assets and interest expense on
deposits and other borrowed funds. Several factors affect net interest income
including changes in interest rates and changes in the asset and liability
balances. SUN's net interest income for the first quarter of 1995 was
$3,007,000 compared to $3,262,000 for the same period of 1996. This $255,000 or
8.48% increase was one of the primary reasons for SUN's improved earnings
performance.
The provision for possible loan losses decreased $45,000. Management's
analysis of the allowance for possible loan losses indicates the reduced
allocation is a result of our loan quality.
OTHER OPERATING INCOME
Other operating income decreased from $413,000 in 1995 to $360,000 in
1996. However, excluding net security gains, other operating income from 1996
was up $17,000 from 1995. SUN recognized a gain of $13,500 on the sale of a
foreclosed real estate property in 1995 and $70,000 in net security gains from
the sale of municipal securities. In 1996, no realized gains or losses
occurred.
OTHER OPERATING EXPENSES
Total other operating expense actually decreased $29,000 or 1.90% from
$1,526,000 in 1995 to $1,497,000 in 1996. The reduced Federal Deposit Insurance
Corporation premium was partially offset by higher net occupancy and equipment
expenses. These higher expenses were due to our previously announced
information technology enhancements along with acquiring additional future
branch locations.
STATEMENT OF CONDITION
SUN's total assets reached $343,066,000 at March 31, 1996, compared to
$305,932,000 at the same period in 1995. This increase was the result of strong
deposit growth, additional borrowed funds through the Federal Home Loan Bank
andcontinued growth of total stockholders' equity. During this period,
investment securities grew $24,106,000 or 24.39% and net loans grew
$10,841,000 or 5.60%. Loan demand continues to be very strong. Total deposits
increased $16,622,000 or a 8.92% change from March 31, 1995. Stockholders'
equity remains strong at $35,082,000, which translates to a very strong
10.23% capital to asset ratio.
<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
paid a cash dividend of $.22 per share to its stockholders on March 8, 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 March 31, 1996 December 31, 1995
<S> <C> <C> <C>
Core capital ratio 4.00% 17.15% 18.47%
Risk-based capital ratio 8.00 18.22 19.59
Leverage ratio 3.00 10.23 11.27
</TABLE>
<PAGE>
SUN BANCORP, INC.
FORM 10-Q
PART II
Items 1, 2, and 3 -- Omitted pursuant to instructions to Part II
Item 4 - Submission of Matters to a Vote of Security Holders
a. SUN BANCORP, INC. held its 1996 Annual Meeting on Thursday, April
25, 1996
b. This information is incorporated by reference to Exhibit 1, item
number one. Those directors whose term of office continued after
the meeting are:
Max E. Bingaman Marlin T. Sierer
Robert A. Hormell Paul R. John
Fred W. Kelly, Jr. Jerry A. Soper
Raymond C. Bowen Howard H. Schnure
Lehman B. Mengel
c. This information is incorporated by reference to Exhibit 1.
d. None
Item 5 -- Other information
The registrant's Board of Directors authorized the repurchase of up to
160,000 shares of SUN BANCORP, INC. stock. The stock buy-back program is
effective until June 1997. The purchased shares will be used for general
corporate purposes.
The Board of Directors also approved a 5% stock dividend and an increased
quarterly dividend payment from $.22 per share to $.23 per share for
stockholders of record May 24, 1996, payable June 7, 1996.
Item 6 -- Exhibits and Reports on Form 8-K
a. No reports on Form 8-K were filed for the quarter ending March 31,
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 __________________ ___________________________________
Fred W. Kelly, Jr.
Chief Executive Officer
(Principal Executive Officer)
___________________________________
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> 3-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-END> MAR-31-1996
<CASH> 6875
<INT-BEARING-DEPOSITS> 544
<FED-FUNDS-SOLD> 0
<TRADING-ASSETS> 0
<INVESTMENTS-HELD-FOR-SALE> 122956
<INVESTMENTS-CARRYING> 0
<INVESTMENTS-MARKET> 0
<LOANS> 206734
<ALLOWANCE> 2194
<TOTAL-ASSETS> 343066
<DEPOSITS> 202910
<SHORT-TERM> 40813
<LIABILITIES-OTHER> 2921
<LONG-TERM> 61340
<COMMON> 4053
0
0
<OTHER-SE> 31029
<TOTAL-LIABILITIES-AND-EQUITY> 343066
<INTEREST-LOAN> 4742
<INTEREST-INVEST> 1801
<INTEREST-OTHER> 11
<INTEREST-TOTAL> 6554
<INTEREST-DEPOSIT> 2026
<INTEREST-EXPENSE> 3292
<INTEREST-INCOME-NET> 3262
<LOAN-LOSSES> 75
<SECURITIES-GAINS> 0
<EXPENSE-OTHER> 1497
<INCOME-PRETAX> 2050
<INCOME-PRE-EXTRAORDINARY> 2050
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 1505
<EPS-PRIMARY> .46
<EPS-DILUTED> .46
<YIELD-ACTUAL> 4.05
<LOANS-NON> 0
<LOANS-PAST> 2954
<LOANS-TROUBLED> 0
<LOANS-PROBLEM> 0
<ALLOWANCE-OPEN> 2191
<CHARGE-OFFS> 72
<RECOVERIES> 0
<ALLOWANCE-CLOSE> 2194
<ALLOWANCE-DOMESTIC> 2194
<ALLOWANCE-FOREIGN> 0
<ALLOWANCE-UNALLOCATED> 710
</TABLE>
SUN BANCORP, INC.
ANNUAL MEETING OF STOCKHOLDERS
APRIL 25, 1996
CERTIFICATE OF JUDGES OF ELECTIONS
We, Charles E. Benner, Gary D. Newcomer and Charles C. Snyder, Judges of
Election at the Annual Meeting of Stockholders of SUN BANCORP, INC. held on
April 25, 1996, hereby certify as follows:
a) That we have reviewed the list of stockholders, proxies and
other relevant papers and records in connection with the
aforesaid meeting:
b) That there are, and were, at the close of business on March 7,
1996, the record date for the aforesaid meeting, 3,194,422
shares of the Corporation outstanding:
c) That we have examined all of the proxies submitted to us with
respect to the aforesaid meeting:
d) That there were present in person or by valid proxy, the
holder of 2,465,492 shares:
e) That we have counted and tabulated all ballots submitted by
the aforesaid holders, in person or by proxy:
f) That the vote for the election of five (5) directors to the
Corporation whose terms end as indicated below is as follows:
David R. Dieck, 3 year term to expire in 1999
FOR 2,462,110 AGAINST 2,384
Louis A. Eaton, 3 year term to expire in 1999
FOR 2,451,758 AGAINST 12,736
Dr. Robert E. Funk, 3 year term to expire in 1999
FOR 2,429,621 AGAINST 34,873
George F. Keller, 3 year term to expire in 1999
FOR 2,461,908 AGAINST 2,586
Dennis J. Van, 3 year term to expire in 1999
FOR 2,462,960 AGAINST 1,534
g) To ratify the appointment of Parente, Randolph, Orlando, Carey
& Associates, Certified Public Accountants as the independent
certified public accountants for SUN BANCORP, INC. for the
year 1996.
FOR 2,455,397 AGAINST 1,103
Judges of Election
Charles E. Benner
Gary D. Newcomer
Charles C. Snyder
