SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
FOR ANNUAL AND TRANSITION REPORTS PURSUANT TO SECTIONS 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934 For the fiscal year ended December 31, 2003.
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OR
[X] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934 For the transition period from to .
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Commission File No. 0-20957
Sun Bancorp, Inc.
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(Exact Name of Registrant as Specified in Its Charter)
New Jersey 52-1382541
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(State or Other Jurisdiction of (I.R.S. Employer
Incorporation or Organization) Identification No.)
226 Landis Avenue, Vineland, New Jersey 08360
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(Address of Principal Executive Offices) (Zip Code)
Registrant's telephone number, including area code: (856) 691-7700
Securities registered pursuant to Section 12(b) of the Exchange Act: None
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Securities registered pursuant to Section 12(g) of the Exchange Act:
Common Stock, $1.00 par value
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(Title of Class)
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 by check mark if disclosure of delinquent filers pursuant to
Item 405 of Regulation S-K is not contained herein, and will not be contained,
to the best of registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-K or any
amendment to this Form 10-K. [X]
Indicate by check mark whether the registrant is an accelerated filer
(as defined in Exchange Act Rule 12b-2). YES X NO .
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The aggregate market value of the voting and non-voting common equity
held by non-affiliates of the registrant, based on the closing price of the
registrant's Common Stock as of June 30, 2003 was approximately $146.2 million.
As of March 5, 2004, there were issued and outstanding 13,301,123
shares of the registrant's Common Stock.
DOCUMENTS INCORPORATED BY REFERENCE
1. Portions of the Annual Report to Shareholders for the Fiscal Year
Ended December 31, 2003. (Parts I, II and IV)
2. Portions of the Proxy Statement for the 2004 Annual Meeting of
Shareholders. (Part III)
PART I
SUN BANCORP, INC. (THE "COMPANY") MAY FROM TIME TO TIME MAKE WRITTEN OR
ORAL "FORWARD-LOOKING STATEMENTS," INCLUDING STATEMENTS CONTAINED IN THE
COMPANY'S FILINGS WITH THE SECURITIES AND EXCHANGE COMMISSION (INCLUDING THIS
ANNUAL REPORT ON FORM 10-K AND THE EXHIBITS HERETO), IN ITS REPORTS TO
SHAREHOLDERS AND IN OTHER COMMUNICATIONS BY THE COMPANY, WHICH ARE MADE IN GOOD
FAITH BY THE COMPANY PURSUANT TO THE "SAFE HARBOR" PROVISIONS OF THE PRIVATE
SECURITIES LITIGATION REFORM ACT OF 1995.
THESE FORWARD-LOOKING STATEMENTS INVOLVE RISKS AND UNCERTAINTIES, SUCH
AS STATEMENTS OF THE COMPANY'S PLANS, OBJECTIVES, EXPECTATIONS, ESTIMATES AND
INTENTIONS, THAT ARE SUBJECT TO CHANGE BASED ON VARIOUS IMPORTANT FACTORS (SOME
OF WHICH ARE BEYOND THE COMPANY'S CONTROL). THE FOLLOWING FACTORS, AMONG OTHERS,
COULD CAUSE THE COMPANY'S FINANCIAL PERFORMANCE TO DIFFER MATERIALLY FROM THE
PLANS, OBJECTIVES, EXPECTATIONS, ESTIMATES AND INTENTIONS EXPRESSED IN SUCH
FORWARD-LOOKING STATEMENTS: THE STRENGTH OF THE UNITED STATES ECONOMY IN GENERAL
AND THE STRENGTH OF THE LOCAL ECONOMIES IN WHICH THE COMPANY CONDUCTS
OPERATIONS; 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, INFLATION, INTEREST RATE, MARKET AND MONETARY FLUCTUATIONS; THE
TIMELY DEVELOPMENT OF AND ACCEPTANCE OF NEW PRODUCTS AND SERVICES OF THE COMPANY
AND THE PERCEIVED OVERALL VALUE OF THESE PRODUCTS AND SERVICES BY USERS,
INCLUDING THE FEATURES, PRICING AND QUALITY COMPARED TO COMPETITORS' PRODUCTS
AND SERVICES; THE IMPACT OF CHANGES IN FINANCIAL SERVICES' LAWS AND REGULATIONS
(INCLUDING LAWS CONCERNING TAXES, BANKING, SECURITIES AND INSURANCE);
TECHNOLOGICAL CHANGES; ACQUISITIONS; CHANGES IN CONSUMER SPENDING AND SAVING
HABITS; AND THE SUCCESS OF THE COMPANY AT MANAGING THE RISKS INVOLVED IN THE
FOREGOING.
THE COMPANY CAUTIONS THAT THE FOREGOING LIST OF IMPORTANT FACTORS IS
NOT EXCLUSIVE. THE COMPANY DOES NOT UNDERTAKE TO UPDATE ANY FORWARD-LOOKING
STATEMENT, WHETHER WRITTEN OR ORAL, THAT MAY BE MADE FROM TIME TO TIME BY OR ON
BEHALF OF THE COMPANY.
Item 1. Business
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General
Sun Bancorp, Inc. (the "Company"), a New Jersey corporation, is a bank
holding company headquartered in Vineland, New Jersey. The Company's principal
subsidiary is Sun National Bank (the "Bank"). At December 31, 2003, the Company
had total assets of $2.6 billion, total deposits of $2.1 billion and total
shareholders' equity of $185.7 million. Substantially all of the Company's
deposits are federally insured by the Bank Insurance Fund ("BIF"), which is
administered by the Federal Deposit Insurance Corporation ("FDIC"). The
Company's remaining deposits are federally insured by the Savings Association
Insurance Fund ("SAIF"), administered by the FDIC. The Company's principal
business is to serve as a holding company for the Bank. As a registered bank
holding company, the Company is subject to the supervision and regulation of the
Board of Governors of the Federal Reserve System (the "Federal Reserve").
2
Through the Bank, the Company provides consumer and business banking
services through five Regional Banking Groups and 78 Community Banking Centers
as of December 31, 2003 in Southern and Central New Jersey, in the contiguous
New Castle County market in Delaware, and in Philadelphia, Pennsylvania. The
Bank offers comprehensive lending, domestic letters of credit, depository and
financial services to its customers and marketplace. The Bank's lending services
to businesses include commercial business loans and commercial real estate
loans. The Bank's commercial deposit services include checking accounts and cash
management products such as electronic banking, sweep accounts, lockbox
services, Internet banking, PC banking and controlled disbursement services. The
Bank's lending services to consumers include residential mortgage loans, home
equity loans and installment loans. The Bank's consumer services include
checking accounts, savings accounts, money market deposits, certificates of
deposit and individual retirement accounts. Through a third party arrangement,
the Bank also offers mutual funds, securities brokerage, annuities and
investment advisory services. The Bank also offers equipment leasing and SBA
loans and is a designated Preferred Lender with the New Jersey Economic
Development Authority.
On December 19, 2003, the Company completed the acquisition of eight
branches from New York Community Bank with deposits of approximately $340
million.
On February 17, 2004, the Company announced that it had entered into an
Agreement and Plan of Merger whereby the Company will acquire Community Bancorp
of New Jersey and its wholly-owned bank subsidiary, Community Bank of New
Jersey, in a stock-for-stock exchange merger in which shareholders of Community
Bancorp of New Jersey will receive 0.83 shares of the Company's common stock for
each issued and outstanding share of Community Bancorp of New Jersey. Upon
completion of the merger, the Company will have approximately $3.2 billion in
total assets. The merger is expected to be consummated in the second quarter of
2004.
The Company's website address is www.sunnb.com. The Company's annual
reports on Form 10-K, quarterly reports on Form 10-Q, current reports on Form
8-K and other documents filed by the Company with the Securities and Exchange
Commission are available free of charge on the Company's website under the
Investor Relations menu.
Market Area
The Bank serves the markets consisting of the 12 counties of central
and southern New Jersey, as well as the contiguous markets of New Castle County,
Delaware and Philadelphia, Pennsylvania. The Bank is the only financial
institution in the central and southern New Jersey markets that has branches
located in all 12 counties. It is one of only three financial institutions with
over $2 billion in total assets headquartered in those counties. Many of the
companies that the Bank competes with in its market area are either larger banks
headquartered outside of New Jersey or smaller institutions that have limited
market coverage and do not offer the Bank's full suite of products.
The Bank's deposit gathering base and lending area is concentrated in
the communities surrounding its offices. The Bank believes these markets are
attractive and have strong growth potential. These markets are home to a diverse
pool of businesses and industries, and a very densely populated consumer base.
The market area is also home to commuters working in New Jersey suburban areas,
New York, Philadelphia and Delaware.
According to June 30, 2003 data from an independent financial
information and research firm, seven of the ten fastest growing counties in New
Jersey (based on population) are within the Bank's market area. The Bank also
believes that the greater Wilmington, Delaware market, which the Bank serves
through its branches in New Castle County, Delaware, has many of the same
attributes and positive trends as the Bank's New Jersey market.
3
The Bank is headquartered in Cumberland County, New Jersey. The city of
Vineland is approximately 30 miles southeast of Philadelphia, Pennsylvania, and
30 miles southeast of Camden, New Jersey. The Philadelphia International Airport
is approximately 45 minutes from Vineland.
The economy of the Bank's primary market area is based upon a mixture
of the agriculture, transportation, manufacturing and tourism trade, including a
substantial casino industry in Atlantic City, New Jersey and support businesses
throughout the Bank's primary market area. These areas are also home to
commuters working in New Jersey suburban areas and in Atlantic City, as well as
in New York and Philadelphia.
Of the Bank's Delaware branches, three are in Wilmington, Delaware
which is approximately 25 miles southwest of Philadelphia, Pennsylvania. The
Philadelphia International Airport is approximately 30 minutes from Wilmington.
Management considers the Bank's strategic positioning to be the
decentralizing of management and authority into five Regional Banking Groups.
The Bank's Southern Region consists of Atlantic, Cape May, Cumberland and Salem
Counties in southern New Jersey; the Eastern Region includes Ocean and Monmouth
Counties; the Northern Region includes Mercer, Middlesex, Somerset and Hunterdon
Counties in central New Jersey; the Western Region consists of Burlington,
Camden and Gloucester Counties in New Jersey and Philadelphia, Pennsylvania; and
the Delaware Region is New Castle County in Delaware.
Regional teams of experienced managers, lenders and relationship
officers from the Bank's three divisions, Commercial, Small Business and
Community Banking, are headquartered within each Regional Group and are
empowered with resources and local decision-making authority. They work together
as a team, in partnership with local Community Banking Centers in the region, to
coordinate a high level of service to local consumer, business, government and
institutional customers. Each Regional Banking Group operates essentially as a
local community bank with a local community focus on serving the specific needs
of the local area and building lasting relationships with customers.
Branch Rationalization Strategy
Starting in 2001, the Company's new management team began the
development and implementation of a strategy to enhance the geographic coverage,
market penetration and profitability of the Bank's branch network by selling,
consolidating or closing underperforming branches and adding branches in more
attractive markets. Through December 31, 2003, the Bank's branch rationalization
program resulted in the sale of five branches, the consolidation of two branches
into existing branch offices and the addition of five new branch offices.
Management anticipates that the addition of the eight former New York
Community Bank branches in December 2003 as well as the announced acquisition of
Community Bank of New Jersey, expected to be completed in the second quarter of
2004, will result in consolidation opportunities and should enable the Bank to
accelerate its branch rationalization program. Management currently intends to
sell, close or consolidate a total of 14 branches in 2004. This strategy could
result in further divestiture or consolidation of existing branches or purchases
of additional branches.
Lending Activities
General. The principal lending activity of the Bank is the origination
of commercial real estate loans, commercial business loans, small business
loans, SBA guaranteed loans, home equity loans, residential real estate loans
and other loans, including installment loans. Substantially all loans are
originated in the Bank's primary market area.
4
Commercial and Industrial Loans. The Bank originates several types of
commercial and industrial loans. Included as commercial and industrial loans are
short- and long-term business loans, lines of credit, commercial real estate
loans, small business loans and real estate construction loans. The Bank's
Commercial Banking division serves companies with annual revenue generally in
excess of $7.0 million and credit needs over $2.0 million. The Bank's Small
Business Banking division serves business with annual revenues of up to $7.0
million and credit needs up to $2.0 million. The Bank's primary focus is the
origination of commercial loans secured by real estate. The Bank is
predominately a secured lender with full recourse from the borrower and the
collateral tends to be real estate. The majority of the Bank's customers for
these loans are small- to medium-sized businesses located in the southern and
central parts of New Jersey, New Castle County, Delaware and Philadelphia,
Pennsylvania.
A significant portion of the Bank's commercial and industrial loans are
concentrated in the hospitality, entertainment and leisure industries, as well
as loans for general office space. Many of these industries are dependent upon
seasonal business and other factors beyond the control of the industries, such
as weather and beach conditions along the New Jersey seashore. Any significant
or prolonged adverse weather or beach conditions along the New Jersey seashore
could have an adverse impact on the borrowers' ability to repay loans. In
addition, because these loans are concentrated in southern and central New
Jersey, a decline in the general economic conditions of southern or central New
Jersey and the impact on discretionary consumer spending could have a material
adverse effect on the Company's financial condition, results of operations and
cash flows.
Commercial and industrial loans generally involve a greater degree of
risk than residential mortgage loans and carry larger loan balances. This
increased credit risk is a result of several factors, including the
concentration of principal in a limited number of loans and borrowers, the
effects of general economic conditions on income-producing activities and
properties and the greater difficulty of evaluating and monitoring these types
of loans. A significant portion of the Bank's commercial and industrial loans
include a balloon payment or repricing feature. A number of factors may affect a
borrower's ability to make or refinance a balloon payment, including without
limitation the financial condition of the borrower at the time, the prevailing
local economic conditions and the prevailing interest rate environment. There
can be no assurance that borrowers will be able to make or refinance balloon
payments when due.
Furthermore, the repayment of commercial real estate loans is typically
dependent upon the successful operation of the related real estate or commercial
project. If the cash flow from the project is reduced, the borrower's ability to
repay the loan may be impaired. This cash flow shortage may result in the
failure to make loan payments. In such cases, the Bank may be compelled to
modify the terms of the loan. In addition, the nature of these loans is such
that they are generally less predictable and more difficult to evaluate and
monitor. As a result, repayment of these loans may be subject to a greater
extent than residential real estate loans to adverse conditions in the real
estate market or economy.
Home Equity Loans. The Bank originates home equity loans, secured by
first or second homes owned or being purchased by the loan applicant. Home
equity loans are consumer revolving lines of credit. The interest rate charged
on such loans is usually a floating rate related to the prime lending rate. Home
equity loans may provide for interest only payments for the first two years with
principal payments to begin in the third year. A home equity loan is typically
originated as a twenty-year note that allows the borrower to draw upon the
approved line of credit during the same period as the note. The Bank generally
requires a loan-to-value ratio in the range of 70% to 80% of the appraised
value, less any outstanding mortgage. Although home equity lines of credit
expose the Company to the risk that falling collateral values may leave such
credits inadequately secured, the Company has not had any significant adverse
experience to date.
5
Second Mortgage Loans. The Bank originates second mortgage loans,
secured by a mortgage lien against the applicant primary, secondary or
investment property. Second mortgage loans are consumer term loans. The interest
rate charged on such loans is usually a fixed rate related to the Bank's cost of
funds and market conditions. Second mortgage loans typically required fixed
payments of principal and interest up to a maximum term of fifteen years. The
average second mortgage term is between five and ten years. The Bank generally
requires a loan-to-value ratio up to a maximum of 80% of the appraised value,
less any outstanding mortgages. Although second mortgage loans expose the
Company to the risk that falling collateral values may leave such credits
inadequately secured, the Company has not had any significant adverse experience
to date.
Residential Real Estate Loans. The Bank's branch and loan personnel
use outside loan correspondents to originate residential mortgages. These loans
are originated using the investor's underwriting standards, rates and terms, and
are approved according to the purchaser/investor's lending policy prior to
origination. Prior to closing, the investor usually has commitments to sell
these loans, at par and without recourse, in the secondary market. Secondary
market sales are generally scheduled to close shortly after the origination of
the loan.
The majority of the Bank's residential mortgage loans consist of loans
secured by owner-occupied, single-family residences. The Bank's mortgage loan
portfolios consist of both fixed-rate and adjustable-rate loans secured by
various types of collateral. Management generally originates residential
mortgage loans in conformity with FannieMae standards so that the loans will be
eligible for sale in the secondary market. Management expects to continue
offering mortgage loans at market interest rates, with substantially the same
terms and conditions as it currently offers.
The retention of adjustable-rate mortgage loans in the Bank's loan
portfolio helps mitigate risk to changes in interest rates. However, there are
unquantifiable credit risks resulting from potential increased costs to the
borrower as a result of repricing adjustable-rate mortgage loans. It is possible
that during periods of rising interest rates, the risk of default on
adjustable-rate mortgage loans may increase due to the upward adjustment of
interest costs to the borrower. Further, although adjustable-rate mortgage loans
allow the Bank to increase the sensitivity of its asset base to changes in
interest rates, the extent of this interest sensitivity is limited by the
periodic and lifetime interest rate adjustment limitations. Accordingly, there
can be no assurance that yields on adjustable-rate mortgages will adjust
sufficiently to compensate for increases in the Bank's cost of funds during
periods of extreme interest rate increase.
The Bank's residential mortgage loans customarily include due-on-sale
clauses, which are provisions giving the Bank the right to declare a loan
immediately due and payable in the event, among other things, that the borrower
sells or otherwise disposes of the real property serving as security for the
loan. Due-on-sale clauses are an important means of adjusting the rates on the
Bank's fixed-rate mortgage portfolios. The Bank usually exercises its right
under these clauses.
Other Loans. Included in other loans are installment or consumer loans
in addition to certain small business loans serving businesses with credit needs
up to $250,000. The small business loans that are included in other loans are
generally credit lines with check writing capabilities or small business loans
with overdraft protection attached. At December 31, 2003, the Bank had $15.8
million of these small business loans.
Installment or consumer loans may entail greater risk than residential
real estate loans, particularly in the case of consumer loans that are unsecured
or secured by assets that depreciate rapidly. Repossessed collateral for a
defaulted consumer loan may not be sufficient for repayment of the outstanding
loan, and the remaining deficiency may not be collectible. At December 31, 2003,
the Bank had $2.1 million of installment loans secured by a variety of
collateral, such as new and used automobiles, boats and certificates of
deposits. At December 31, 2003, the Bank had $5.4 million of unsecured
installment loans.
6
The Bank has a modular housing portfolio with $25.3 million in loans
outstanding as of December 31, 2003. This activity is generated through a third
party arrangement, which began in 1990. These loans are originated using the
Bank's underwriting standards, rates and terms and are approved according to the
Bank's policies. The credit risk in the modular home portfolio is managed like
any other consumer portfolio through loan to value requirements, debt to income
ratios and credit history of the borrower. Historically, the modular home
business has been viewed as a higher risk lending activity with dealers having
little to zero net worth.
Additionally, the Bank has a mature portfolio from previous third party
relationships that are no longer active in generating new business. These loans
are centered in manufactured homes, campgrounds and recreational vehicles. At
December 31, 2003, the Bank had $2.2 million of such loans outstanding.
Loan Solicitation and Processing. Loan originations are derived from a
number of sources such as loan officers, existing customers and borrowers,
referrals from real estate professionals, accountants, attorneys, regional
advisory boards and the Board of Directors.
Upon the receipt of a loan request, the borrower's financial condition
is analyzed, and appropriate agency reports are obtained to verify the
applicant's creditworthiness. For any real estate that will secure a loan, the
Bank obtains an appraisal or evaluation from an independent appraiser approved
by the Bank and licensed or certified by the state. After all required
information is received, a credit decision is made. Depending on the type,
collateral and amount of the credit request, various levels of approval may be
necessary. The Bank has implemented a Loan Approval Matrix (LAM) which was
devised to facilitate the timely approval of commercial loans in an environment
that promotes responsible use of lending authority by groups of loan and credit
officers acting in concert. In terms of control, the LAM is structured to
provide for at least two signatures for every action.
On an annual basis, the Chief Executive Officer presents to the Board
of Directors the recommended structure of the LAM in terms of the amounts of
lending authority granted to combining levels. On that same occasion, the Chief
Executive Officer also recommends levels of lending authority within the matrix
for individual loan and credit officers. Between the annual reviews of lending
authorities by the Board of Directors, the Chief Executive Officer assigns
interim lending authorities within the LAM to individual loan and credit
officers and reports his actions to the Board in a timely fashion.
Levels of individual lending authority are based on the functional
assignment of a loan officer as well as the officer's perceived level of
expertise and areas of experience.
The positions of credit officer (CO) and senior credit officer (SCO)
are an integral feature of the LAM process. CO's and SCO's are granted
substantial levels of authority but do not carry a portfolio. These individuals
are collectively responsible for maintaining the quality and soundness of the
Bank's loan portfolio.
Title insurance policies are generally required on all first mortgage
loans. Hazard insurance coverage is required on all properties securing loans
made by the Bank. Flood insurance is also required, when applicable.
Loan applicants are notified of the credit decision by letter. If the
loan is approved, the loan commitment specifies the terms and conditions of the
proposed loan including the amount, interest rate, amortization term, a brief
description of the required collateral, and the required insurance coverage. The
borrower must provide proof of fire, flood (if applicable) and casualty
insurance on the property serving as collateral, which insurance must be
maintained during the full term of the loan.
7
Loan Commitments. When a commercial loan is approved, the Bank issues a
written commitment to the loan applicant. The commitment indicates the loan
amount, term and interest rate and is valid for approximately 45 days. At
December 31, 2003, the Bank had approximately $139.5 million in commercial loan
commitments outstanding.
Credit Risk, Credit Administration and Loan Review. Credit risk
represents the possibility that a customer or counterparty may not perform in
accordance with contractual terms. The Bank incurs credit risk whenever it
extends credit to, or enters into other transactions with, customers. The risks
associated with extensions of credit include general risk, which is inherent in
the lending business, and risk specific to individual borrowers. The credit
administration department is responsible for the overall management of the
Bank's credit risk and the development, application and enforcement of uniform
credit policies and procedures the principal purpose of which is to minimize
such risk. One objective of credit administration is to identify and, to the
extent feasible, diversify extensions of credit by industry concentration,
geographic distribution and the type of borrower. Loan review and other loan
monitoring practices provide a means for management to ascertain whether proper
credit, underwriting and loan documentation policies, procedures and practices
are being followed by the Bank's loan officers and are being applied uniformly.
While management continues to review these and other related functional areas,
there can be no assurance that the steps the Bank has taken to date will be
sufficient to enable it to identify, measure, monitor and control all credit
risk.
Investment Securities Activities
General. The investment policy of the Bank is established by senior
management and approved by the Board of Directors. It is based on asset and
liability management goals and is designed to provide a portfolio of high
quality investments that optimize interest income within acceptable limits of
safety and liquidity. The Bank's investments consist primarily of federal funds,
securities issued or guaranteed by the United States Government or its agencies,
states and political subdivisions and corporate bonds.
Sources of Funds
General. Deposits are the major source of the Bank's funds for lending
and other investment purposes. In addition to deposits, the Bank derives funds
from the amortization, prepayment or sale of loans, maturities or sale of
investment securities, borrowings and operations. Scheduled loan principal
repayments are a relatively stable source of funds, while deposit inflows and
outflows and loan prepayments are significantly influenced by general interest
rates and market conditions.
Deposits. Consumer and commercial deposits are attracted principally
from within the Bank's primary market area through the offering of a broad
selection of deposit instruments including checking, regular savings, money
market deposits, term certificate accounts and individual retirement accounts.
Deposit account terms vary according to the minimum balance required, the time
periods the funds must remain on deposit and the interest rate, among other
factors. The Bank regularly evaluates the internal cost of funds, surveys rates
offered by competing institutions, reviews the Bank's cash flow requirements for
lending and liquidity and executes rate changes when deemed appropriate. The
Bank does not obtain funds through brokers nor does it solicit funds outside the
States of New Jersey, Delaware or Pennsylvania.
Borrowings. Deposits are the primary source of funds of the Bank's
lending and investment activities and for its general business purposes. The
Bank may obtain advances from the Federal Home Loan Bank (the "FHLB") of New
York to supplement its supply of lendable funds. Such advances must be secured
by a pledge of a portion of the Bank's mortgage-backed securities and first
mortgage loans. The Bank, if the need arises, may also access the Federal
Reserve Bank discount window to supplement its supply of lendable funds and to
meet deposit withdrawal requirements. At December 31, 2003, the Bank had $164.0
million in secured FHLB advances. See "Management's Discussion and Analysis of
Financial Condition and Results of Operations - Borrowings" in the Company's
2003 Annual Report to Shareholders (the "Annual Report").
8
Repurchase Agreements. The Bank also obtains funds through overnight
repurchase agreements with customers pursuant to which the Bank sells U.S.
Treasury securities to customers under an agreement to repurchase them, at par,
on the next business day. At December 31, 2003, the amount of securities under
agreements to repurchase with customers totaled $55.9 million. See "Management's
Discussion and Analysis of Financial Condition and Results of Operations -
Borrowings" in the Annual Report. For additional information regarding
repurchase agreements, refer to Note 14 of the Notes to Consolidated Financial
Statements included in the Annual Report.
Fee Income Services
The Bank offers an expanded array of full-service banking capabilities
though products and services designed to enhance the overall relationship with
its customers.
Cash Management Services. The Bank offers a menu of cash management
services designed to meet the more sophisticated needs of its commercial and
small business customers. The Cash Management department offers additional
products and services such as electronic banking, sweep accounts, lockbox
services, internet banking, PC banking and controlled disbursement services.
Many of these services are provided through third-party vendors with links to
the Bank's data center.
Sun Financial Services. The Bank's investment services division, in
conjunction with its broker-dealer affiliation, offers experienced professionals
that deliver a full range products and services to meet the specific needs of
the Bank's customers. The products utilized are Insurance, Mutual Funds,
Securities and Real Estate Investment Trusts.
Leasing. During 2003, the Bank developed and implemented a leasing
campaign designed to provide an alternative to direct financing for the Bank's
customers. The Bank provides equipment financing and leasing services to a broad
spectrum of businesses throughout the Bank's footprint. Though a network of
internal and outside experienced leasing professionals, the Bank provides its
customers creative lease structures as well as value-added asset management
services.
Competition
The Bank faces substantial competition both in attracting deposits and
in lending funds. The States of New Jersey and Delaware and the county of
Philadelphia, Pennsylvania have high densities of financial institutions, many
of which are branches of significantly larger institutions which have greater
financial resources than the Bank, all of which are competitors of the Bank to
varying degrees. In order to compete with the many financial institutions
serving its primary market area, the Bank's strategy is to focus on providing a
superior level of personalized service to local business and individual
customers in local communities through its Regional Banking Groups - as a
springboard to building long-term, profitable relationships with those customers
in its primary market area.
The competition for deposits comes from other insured financial
institutions such as commercial banks, thrift institutions, credit unions, and
multi-state regional and money center banks in the Bank's market area.
Competition for funds also includes a number of insurance products sold by local
agents and investment products such as mutual funds and other securities sold by
local and regional brokers. Loan competition varies depending upon market
conditions and comes from other insured financial institutions such as
commercial banks, thrift institutions, credit unions, multi-state regional and
money center banks, and mortgage-bankers many of whom have far greater resources
than the Bank. Non-bank competition, such as investment brokerage houses, has
intensified in recent years for all banks as non-bank competitors are not
subject to the same regulatory burdens.
9
Personnel
At December 31, 2003, the Company had 686 full-time and 122 part-time
employees. The Company's employees are not represented by a collective
bargaining group. The Company believes that its relationship with its employees
is good.
SUPERVISION AND REGULATION
Introduction
Bank holding companies and banks are extensively regulated under both
federal and state law. The description of statutory provisions and regulations
applicable to banking institutions and their holding companies set forth in this
Form 10-K does not purport to be a complete description of such statutes and
regulations and their effects on the Bank and the Company. The discussion is
qualified in its entirety by reference to all particular statutory or regulatory
provisions.
The Company is a legal entity separate and distinct from the Bank.
Accordingly, the right of the Company, and consequently the right of creditors
and shareholders of the Company, to participate in any distribution of the
assets or earnings of the Bank is necessarily subject to the prior claims of
creditors of the Bank, except to the extent that claims of the Company in its
capacity as creditor may be recognized. The principal sources of the Company's
revenue and cash flow are management fees and dividends from the Bank. There are
legal limitations on the extent to which a subsidiary bank can finance or
otherwise supply funds to its parent holding company.
The Company
General. As a registered bank holding company, the Company is regulated
under the Bank Holding Company Act of 1956, as amended ("BHCA") and is subject
to supervision and regular inspection by the Federal Reserve.
Sarbanes Oxley Act of 2002. On July 30, 2002, President Bush signed
into law the Sarbanes-Oxley Act of 2002 (the "Act"). The Securities and Exchange
Commission (the "SEC") has promulgated new regulations pursuant to the Act and
may continue to propose additional implementing or clarifying regulations as
necessary in furtherance of the Act. The passage of the Act by Congress and the
implementation of new regulations by the SEC subject publicly-traded companies
to additional and more cumbersome reporting regulations and disclosure.
Compliance with the Act and corresponding regulations may increase the Company's
expenses.
Financial Modernization. The Gramm-Leach-Bliley Act ("GLB") permits
qualifying bank holding companies to become financial holding companies and
thereby affiliate with securities firms and insurance companies and engage in
other activities that are financial in nature. GLB defines "financial in nature"
to include securities underwriting, dealing and market making; sponsoring mutual
funds and investment companies; insurance underwriting and agency; merchant
banking activities; and activities that the Federal Reserve Board has determined
to be closely related to banking. A qualifying national bank also may engage,
subject to limitations on investment, in activities that are financial in
nature, other than insurance underwriting, insurance company portfolio
investment, real estate development, and real estate investment, through a
financial subsidiary of the bank. GLB also prohibits new unitary thrift holding
companies from engaging in nonfinancial activities or from affiliating with a
nonfinancial entity.
10
Capital Requirements. The Federal Reserve has adopted risk-based
capital guidelines for bank holding companies, such as the Company. The required
minimum ratio of total capital to risk-weighted assets (including off-balance
sheet activities, such as standby letters of credit) is 8%. At least half of the
total capital is required to be "Tier 1 capital," consisting principally of
common shareholders' equity, noncumulative perpetual preferred stock and
minority interests in the equity accounts of consolidated subsidiaries, less
goodwill. The remainder ("Tier 2 capital") may consist of a limited amount of
subordinated debt and intermediate-term preferred stock, certain hybrid capital
instruments and other debt securities, perpetual preferred stock, and a limited
amount of the general loan loss allowance.
In addition to the risk-based capital guidelines, the Federal Reserve
established minimum leverage ratio (Tier 1 capital to average total assets)
guidelines for bank holding companies. These guidelines provide for a minimum
leverage ratio of 3% for those bank holding companies which have the highest
regulatory examination ratings and are not contemplating or experiencing
significant growth or expansion. All other bank holding companies are required
to maintain a leverage ratio of at least 1% to 2% above the 3% stated minimum.
At December 31, 2003, the Company was in compliance with these requirements. The
Bank is also subject to similar capital requirements adopted by the OCC and was
in compliance with such requirements at December 31, 2003. See Note 24 of the
Notes to Consolidated Financial Statements included in the Annual Report.
The risk-based capital standards are required to take adequate account
of interest rate risk, concentration of credit risk and the risks of
non-traditional activities.
State Regulation of Bank Holding Companies. Bank holding companies are
exclusively state chartered corporations and as such are subject to state
regulation. Under ss.375 to Article 48 of the New Jersey Banking Statutes, the
Commissioner of Banking of New Jersey has the right to examine any company which
controls a bank, the cost of which examination may be assessed against and paid
by the company. Such examination may be conducted jointly, concurrently or in
lieu of examinations made by a federal or other state bank regulatory agency. As
a bank holding company located in New Jersey, the Company may acquire a bank or
bank holding company located in any state other than New Jersey, provided,
however, that such acquisition is permitted by applicable law of the United
States or any other state.
Source of Strength Policy. Under Federal Reserve policy, a bank holding
company is expected to serve as a source of financial strength to each of its
subsidiary banks and to commit resources to support each such bank. Consistent
with its "source of strength" policy for subsidiary banks, the Federal Reserve
has stated that, as a matter of prudent banking, a bank holding company
generally should not maintain a rate of cash dividends unless its net income
available to common shareholders has been sufficient to fund fully the
dividends, and the prospective rate of earnings retention appears to be
consistent with the corporation's capital needs, asset quality and overall
financial condition.
The Bank
General. The Bank is subject to supervision and examination by the OCC.
In addition, the Bank is insured by and subject to certain regulations of the
FDIC. The Bank is also subject to various requirements and restrictions under
federal and state law, including requirements to maintain reserves against
deposits, restrictions on the types, amount and terms and conditions of loans
that may be granted and limitations on the types of investments that may be made
and the types of services that may be offered. Various consumer laws and
regulations also affect the operations of the Bank.
Dividend Restrictions. Dividends from the Bank constitute the principal
source of income to the Company. The Bank is subject to various statutory and
regulatory restrictions on its ability to pay dividends to the Company. Under
such restrictions, the amount available for payment of dividends to the Company
by the Bank totaled $17.6 million at December 31, 2003. In addition, the OCC has
the authority to prohibit the Bank from paying dividends, depending upon the
Bank's financial condition, if such payment is deemed to
11
constitute an unsafe or unsound practice. The ability of the Bank to pay
dividends in the future is presently, and could be further, influenced by bank
regulatory and supervisory policies.
Affiliate Transaction Restrictions. The Bank is subject to federal laws
that limit the transactions by a subsidiary bank to or on behalf of its parent
company and to or on behalf of any nonbank subsidiaries. Such transactions by a
subsidiary bank to its parent company or to any nonbank subsidiary are limited
to 10% of a bank subsidiary's capital and surplus and, with respect to such
parent company and all such nonbank subsidiaries, to an aggregate of 20% of such
bank subsidiary's capital and surplus. Further, loans and extensions of credit
generally are required to be secured by eligible collateral in specified
amounts. Federal law also prohibits banks from purchasing "low-quality" assets
from affiliates.
Acquisitions. The Bank has the ability, subject to certain
restrictions, including state opt-out provisions, to acquire by acquisition or
merger branches outside its home state. The establishment of new interstate
branches is possible in those states with laws that expressly permit it.
Interstate branches are subject to certain laws of the states in which they are
located.
FDIC Insurance Assessments. Substantially all of the deposits of the
Bank are insured by the BIF and the remaining deposits are insured by the SAIF,
all of which are subject to FDIC insurance assessments. The amount of FDIC
assessments paid by individual insured depository institutions is based on their
relative risk as measured by regulatory capital ratios and certain other
factors.
Enforcement Powers of Federal Banking Agencies. Federal banking
agencies possess broad powers to take corrective and other supervisory action as
deemed appropriate for an insured depository institution and its holding
company. The extent of these powers depends on whether the institution in
question is considered "well capitalized," "adequately capitalized,"
"undercapitalized," "significantly undercapitalized" or "critically
undercapitalized." At December 31, 2003, the Bank exceeded the required ratios
for classification as "well capitalized." The classification of depository
institutions is primarily for the purpose of applying the federal banking
agencies' prompt corrective action and other supervisory powers and is not
intended to be, and should not be interpreted as, a representation of the
overall financial condition or prospects of any financial institution.
Under the OCC's prompt corrective action regulations, the OCC is
required to take certain supervisory actions against undercapitalized
institutions, the severity of which depends upon the institution's degree of
undercapitalization. Generally, a bank is considered "well capitalized" if its
ratio of total capital to risk-weighted assets is at least 10%, its ratio of
Tier 1 (core) capital to risk-weighted assets is at least 6%, its ratio of core
capital to total assets is at least 5%, and it is not subject to any order or
directive by the OCC to meet a specific capital level. A bank generally is
considered "adequately capitalized" if its ratio of total capital to
risk-weighted assets is at least 8%, its ratio of Tier 1 (core) capital to
risk-weighted assets is at least 4%, and its ratio of core capital to total
assets is at least 4% (3% if the institution receives the highest CAMEL rating).
A bank that has lower ratios of capital is categorized as "undercapitalized,"
"significantly under capitalized," or "critically undercapitalized." Numerous
mandatory supervisory actions become immediately applicable to an
undercapitalized institution, including, but not limited to, increased
monitoring by regulators and restrictions on growth, capital distributions and
expansion.
The OCC's prompt corrective action powers can include, among other
things, requiring an insured depository institution to adopt a capital
restoration plan which cannot be approved unless guaranteed by the institution's
parent company; placing limits on asset growth and restrictions on activities;
including restrictions on transactions with affiliates; restricting the interest
rate the institution may pay on deposits; prohibiting the payment of principal
or interest on subordinated debt; prohibiting the bank from making capital
distributions without prior regulatory approval and, ultimately, appointing a
receiver for the institution. Among other things, only a "well capitalized"
depository institution may accept brokered deposits without prior regulatory
approval and only an "adequately capitalized" depository institution may accept
brokered deposits with prior regulatory approval. The OCC could also take any
one of a number of
12
discretionary supervisory actions, including the issuance of a capital directive
and the replacement of senior executive officers and directors.
Capital Guidelines. Under the risk-based capital guidelines applicable
to the Company and the Bank, the minimum guideline for the ratio of total
capital to risk-weighted assets (including certain off-balance sheet activities)
is 8.00%. At least half of the total capital must be "Tier 1" or core capital,
which primarily includes common shareholders' equity and qualifying preferred
stock, less goodwill and other disallowed intangible assets. "Tier 2" or
supplementary capital includes, among other items, certain cumulative and
limited-life preferred stock, qualifying subordinated debt and the allowance for
credit losses, subject to certain limitations, less required deductions as
prescribed by regulation.
In addition, the federal bank regulators established leverage ratio
(Tier 1 capital to total adjusted average assets) guidelines providing for a
minimum leverage ratio of 3% for bank holding companies and banks meeting
certain specified criteria, including that such institutions have the highest
regulatory examination rating and are not contemplating significant growth or
expansion. Institutions not meeting these criteria are expected to maintain a
ratio which exceeds the 3% minimum by at least 100 to 200 basis points. The
federal bank regulatory agencies may, however, set higher capital requirements
when particular circumstances warrant. Under the federal banking laws, failure
to meet the minimum regulatory capital requirements could subject a bank to a
variety of enforcement remedies available to federal bank regulatory agencies.
At December 31, 2003, the Bank's total and Tier 1 risk-based capital
ratios and leverage ratios exceeded the minimum regulatory capital requirements.
See Note 24 of the Notes to Consolidated Financial Statements included in the
Annual Report.
Item 2. Properties
- ------------------
At December 31, 2003, the Company operated from its main office in
Vineland, New Jersey and 78 Community Banking Centers. The Bank leases its main
office and 36 Community Banking Centers. The remainder of the community banking
centers are owned by the Bank.
Item 3. Legal Proceedings
- -------------------------
The Company or the Bank is periodically involved in various claims and
lawsuits, such as claims to enforce liens, condemnation proceedings on
properties in which the Bank holds security interests, claims involving the
making and servicing of real property loans, and other issues incident to the
Company's and the Bank's business. While the ultimate outcome of these
proceedings cannot be predicated with certainty, management, after consultation
with counsel representing the Company in these proceedings, does not expect that
the resolution of these proceedings will have a material effect on the Company's
financial condition, results of operations or cash flows. In addition,
management was not aware of any pending or threatened material litigation as of
December 31, 2003.
Item 4. Submission of Matters to a Vote of Security Holders
- -------------------------------------------------------------
No matter was submitted to a vote of security holders during the fourth
quarter of the fiscal year.
PART II
Item 5. Market for Registrant's Common Equity and Related Stockholder Matters
- -------------------------------------------------------------------------------
The information contained under the caption "Price Range of Common
Stock and Dividends" in the Company's 2003 Annual Report to Shareholders, filed
as Exhibit 13 to this Report (the "Annual Report"), is incorporated herein by
reference.
13
Item 6. Selected Financial Data
- -------------------------------
The information contained under the caption "Selected Financial Data"
in the Company's Annual Report is incorporated herein by reference.
Item 7. Management's Discussion and Analysis of Financial Condition and Results
- --------------------------------------------------------------------------------
of Operations
-------------
The information contained under the caption "Management's Discussion
and Analysis of Financial Condition and Results of Operations" in the Company's
Annual Report is incorporated herein by reference.
Item 7A. Quantitative and Qualitative Disclosures About Market Risk
- --------------------------------------------------------------------
The information contained under the captions "Management's Discussion
and Analysis of Financial Condition and Results of Operations -- Gap Analysis"
and "-- Net Interest Income Simulation" in the Company's Annual Report is
incorporated herein by reference.
Item 8. Financial Statements and Supplementary Data
- ----------------------------------------------------
The Consolidated Financial Statements of Sun Bancorp, Inc. and the
Summarized Quarterly Financial Data included in the notes thereto, included in
the Annual Report filed as Exhibit 13, are incorporated herein by reference.
Item 9. Changes in and Disagreements With Accountants On Accounting and
- --------------------------------------------------------------------------------
Financial Disclosure
--------------------
Not applicable.
Item 9A. Controls and Procedures
- ---------------------------------
(a) Evaluation of disclosure controls and procedures. Based on their
evaluation of the Company's disclosure controls and procedures (as defined in
Rule 13a-15(e) under the Securities Exchange Act of 1934 (the "Exchange Act")),
the Company's principal executive officer and principal financial officer have
concluded that as of the end of the period covered by this Annual Report on Form
10-K such disclosure controls and procedures are effective to ensure that
information required to be disclosed by the Company in reports that it files or
submits under the Exchange Act is recorded, processed, summarized and reported
within the time periods specified in Securities and Exchange Commission rules
and forms.
(b) Changes in internal control over financial reporting. During the
last quarter of the year under report, there was no change in the Company's
internal control over financial reporting that has materially affected, or is
reasonably likely to materially affect, the Company's internal control over
financial reporting.
PART III
Item 10. Directors and Executive Officers of the Registrant
- ------------------------------------------------------------
The information contained under the sections captioned "Additional
Information About Directors and Executive Officers - Section 16(a) Beneficial
Ownership Reporting Compliance" and "Proposal I - Election of Directors" in the
Company's Proxy Statement for its 2003 Annual Meeting of Shareholders (the
"Proxy Statement") is incorporated herein by reference.
The Company has adopted a Code of Ethics and Conduct that applies to
its principal executive officer, principal financial officer, principal
accounting officer or controller or persons performing similar
14
functions. A copy of the Code of Ethics and Conduct is posted at the Company's
website at www.sunnb.com.
-------------
Item 11. Executive Compensation
- --------------------------------
The information contained under the section captioned "Director and
Executive Officer Compensation" in the Proxy Statement is incorporated herein by
reference.
Item 12. Security Ownership of Certain Beneficial Owners and Management
- ------------------------------------------------------------------------
(a) Security Ownership of Certain Beneficial Owners
Information required by this item is incorporated herein by
reference to the section captioned "Voting Securities and
Principal Holders Thereof" in the Proxy Statement.
(b) Security Ownership of Management
Information required by this item is incorporated herein by
reference to the first table under the caption "Proposal I -
Election of Directors" in the Proxy Statement.
(c) Changes in Control
Management of the Registrant knows of no arrangements,
including any pledge by any person of securities of the
Registrant, the operation of which may at a subsequent date
result in a change in control of the Registrant.
(d) Securities Authorized for Issuance Under Equity Compensation
Plans
Set forth below is information as of December 31, 2003 with respect to
compensation plans under which equity securities of the Registrant are
authorized for issuance.
EQUITY COMPENSATION PLAN INFORMATION
(a) (b) (c)
Number of Number of securities
securities Weighted-average remaining available
to be issued upon exercise price of for future issuance under
exercise of outstanding equity compensation plans
outstanding options, options, warrants (excluding securities
warrants and rights and rights reflected in column (a))
------------------- ---------- ------------------------
Equity compensation plans
approved by shareholders(1) 2,714,014 $10.21 32,008
Equity compensation plans
not approved by shareholders(2) 0 0 0
--------- ------ ------
TOTAL 2,714,014 $10.21 32,008
========= ====== ======
- ----------
(1) Plans approved by shareholders include the 1995 Stock Option Plan, the 1997
Stock Option Plan and the 2002 Stock Option Plan.
(2) Not Applicable.
15
Item 13. Certain Relationships and Related Transactions
- --------------------------------------------------------
The information contained under the section captioned "Additional
Information About Directors and Executive Officers - Certain Relationships and
Related Transactions" in the Proxy Statement is incorporated herein by
reference.
Item 14. Principal Accounting Fees and Services
- ------------------------------------------------
The information called for by this item is incorporated herein by
reference to the section captioned "Audit Fees and Services" in the Proxy
Statement.
PART IV
Item 15. Exhibits, Financial Statement Schedules, and Reports on Form 8-K
- -------------------------------------------------------------------------
(a) The following documents are filed as a part of this report:
(1) The following consolidated financial statements and the
report of independent auditor of the Registrant included in
the Registrant's Annual Report to Shareholders are
incorporated herein by reference and also in Item 8 hereof.
Independent Auditors' Report
Consolidated Statements of Financial Condition as of
December 31, 2003 and 2002
Consolidated Statements of Income for the Years Ended
December 31, 2003, 2002 and 2001
Consolidated Statements of Shareholders' Equity for the Years Ended
December 31, 2003, 2002 and 2001
Consolidated Statements of Cash Flows for the Years Ended
December 31, 2003, 2002 and 2001
Notes to Consolidated Financial Statements
(2) There are no financial statements schedules that are
required to be included in Part II, Item 8.
(b) The following reports on Form 8-K were filed during the quarter
ended December 31, 2003.
o The Company filed a Current Report on Form 8-K on October 17, 2003 to
report (1) the filing of a registration statement on Form S-3; and (2)
earnings for the quarter ended September 30, 2003.
o The Company filed a Current Report on Form 8-K on December 22, 2003 to
report (1) the completion of the acquisition of eight New York Community
Bank branches; (2) the issuance of $40 million aggregate principal amount
of capital securities; and (3) the issuance of 1,495,00 shares of common
stock.
(c) The following exhibits are filed as part of this report:
3(i) Amended and Restated Certificate of Incorporation of
Sun Bancorp, Inc.(1)
3(ii) Amended and Restated Bylaws of Sun Bancorp, Inc.(2)
10.1 1995 Stock Option Plan(3)
10.2 Amended and Restated 1997 Stock Option Plan(4)
10.3 2002 Stock Option Plan(5)
16
10.4 Directors Stock Purchase Plan(6)
10.5 Form of Change in Control Severance Agreement(7)
10.6 Severance Agreement between Thomas A. Bracken and
Sun National Bank(7)
11 Computation regarding earnings per share(8)
13 2003 Annual Report to Shareholders
21 Subsidiaries of the Registrant
23 Consent of Deloitte & Touche LLP
31 Certification pursuant to Section 302 of the
Sarbanes-Oxley Act of 2002
32 Certification pursuant to Section 906 of the
Sarbanes-Oxley Act of 2002
- ----------------
(1) Incorporated by reference to the Company's Registration Statement on Form
S-3 (File No. 333-62223) filed with the SEC on August 25, 1998.
(2) Incorporated by reference to the Company's Annual Report on Form 10-K for
the fiscal year ended December 31, 1997 (File No. 0-20957).
(3) Incorporated by reference to the Form 10 filed with the SEC on June 28,
1996 (File No. 0-20957).
(4) Incorporated by reference to the Company's Annual Report on Form 10-K for
the fiscal year ended December 31, 1999 (File No. 0-20957).
(5) Incorporated by reference to Appendix A to the Company's Proxy Statement
for the 2003 Annual Meeting of Shareholders filed with the SEC on April 16,
2002 (File No. 0-20957).
(6) Incorporated by reference to Exhibit 4.3 to the Registrant's Registration
Statement on Form S-8, filed with the SEC on August 1, 1997 (File No.
333-32681).
(7) Incorporated by reference to the Company's Annual Report on Form 10-K for
the fiscal year ended December 31, 2000 (File No. 0-20957).
(8) Incorporated by reference to Note 23 of the Notes to Consolidated Financial
Statements of the Company included in Exhibit 13 hereto.
17
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) 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 as of March 12, 2004.
SUN BANCORP, INC.
By: /s/Thomas A. Bracken
-----------------------------------------------
Thomas A. Bracken
President, Chief Executive Officer and Director
(Duly Authorized Representative)
Pursuant to the requirements of the Securities Exchange Act of 1934,
this report has been signed below by the following persons on behalf of the
registrant and in the capacities indicated as of March 12, 2004.
/s/Bernard A. Brown /s/Thomas A. Bracken
- ------------------------------------------------------ --------------------------------------------------
Bernard A. Brown Thomas A. Bracken
Chairman President, Chief Executive Officer and Director
/s/Ike Brown /s/Sidney R. Brown
- ------------------------------------------------------ --------------------------------------------------
Ike Brown Sidney R. Brown
Director Vice Chairman, Secretary and Treasurer
/s/Jeffrey S. Brown /s/Peter Galetto, Jr.
- ------------------------------------------------------ --------------------------------------------------
Jeffrey S. Brown Peter Galetto, Jr.
Director Director
/s/Linwood C. Gerber /s/Douglas J. Heun
- ------------------------------------------------------ --------------------------------------------------
Linwood C. Gerber Douglas J. Heun
Director Director
/s/Anne E. Koons /s/Vito J. Marseglia
- ------------------------------------------------------ --------------------------------------------------
Anne E. Koons Vito J. Marseglia
Director Director
/s/Alfonse M. Mattia /s/George A. Pruitt
- ------------------------------------------------------ --------------------------------------------------
Alfonse M. Mattia George A. Pruitt
Director Director
/s/Anthony Russo, III /s/Edward H. Salmon
- ------------------------------------------------------ --------------------------------------------------
Anthony Russo, III Edward H. Salmon
Director Director
/s/John D. Wallace /s/Audrey S. Oswell
- ------------------------------------------------------ --------------------------------------------------
John D. Wallace Audrey S. Oswell
Director Director
/s/Dan A. Chila
- ------------------------------------------------------
Dan A. Chila
Executive Vice President and Chief Financial Officer
(Principal Accounting Officer)
18