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, 2004 .
OR
[ ] 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
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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 .
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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. [ ]
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, 2004 was approximately $193.7 million.
As of March 9, 2005, there were issued and outstanding 17,127,888 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, 2004. (Parts I, II and IV)
2. Portions of the Proxy Statement for the 2005 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, 2004, the Company
had total assets of $3.1 billion, total deposits of $2.4 billion and total
shareholders' equity of $279.2 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 its Regional Banking Groups and 73 Community Banking Centers as
of December 31, 2004 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 offers mutual funds, securities brokerage, annuities and investment
advisory services. The Bank recently achieved Preferred Lender status with the
SBA, offers equipment leasing and is a designated Preferred Lender with the New
Jersey Economic Development Authority.
On July 8, 2004, the Company completed the acquisition of Community Bancorp
of New Jersey and its wholly-owned bank subsidiary, Community Bank of New
Jersey. Community Bank of New Jersey operated eight branches, and at the time of
acquisition, had approximately $374 in assets and $342 million of deposits.
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 15 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 two financial institutions with
over $3 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.
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.
3
Management considers the Bank's strategic positioning and competitive
advantage to be the decentralizing of management and authority into its Regional
Banking Groups. The Bank's Southern Region consists of Gloucester, Cumberland
and Salem Counties in southern New Jersey; the Eastern/North Region includes
Ocean and Monmouth Counties; the Northern Region includes Mercer and Middlesex,
Counties in central New Jersey; the Western Region consists of Burlington,
Camden and Philadelphia Counties in New Jersey and Pennsylvania; and the
Delaware Region is New Castle County in Delaware. In addition, in October 2004,
the Company opened a newly created Loan Production Office (LPO) in Short Hills,
New Jersey. This LPO will service northern New Jersey and will be led by
experienced, well-known bankers who enjoy a strong customer following in this
area.
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
Beginning in 2001, the Company began to implement a strategy to maximize
our market coverage and improve branch profitability with the most efficient
number of branches. Selling, consolidating or closing under performing branches
and adding branches in more attractive markets was accomplished in the
successful execution of this strategy. Through December 31, 2004, we have sold
six branches and consolidated fourteen branches into existing offices. These
twenty branches had an average deposit size of approximately $11.5 million. Over
that same period we opened seven de novo branch offices. Several recent
acquisitions have enhanced our franchise and strengthened our market position in
five strategic counties in New Jersey. In December 2003, the Bank acquired eight
branches in Atlantic, Camden and Gloucester counties with approximately $340
million of deposits from New York Community Bancorp. In July 2004, the Company
acquired Community Bancorp of New Jersey which added eight new branches in
Monmouth and Middlesex counties with approximately $342 million of deposits.
As a result of this branch rationalization program over the past four
years, the number of branch offices have only grown by three while deposits have
grown 71.4% from $1.4 billion at December 31, 2000 to total deposits at December
31, 2004 of $2.4 billion. More importantly, the average deposit size per branch
has grown from $20.2 million to $33.3 million over this same period.
While the Company has successfully completed its branch rationalization
program during 2004, our strategic efforts surrounding our branch franchise will
be ongoing. We will continue to take advantage of strategic opportunities in our
marketplace to grow our core businesses. We expect that the continued
consolidation of the banking industry and the customer disruption caused by
larger regional bank mergers will provide opportunities to expand our operations
and increase our market share through branch and whole bank acquisitions as well
as from internal growth and de novo branching. We will also continue to evaluate
the profitability of our existing branch network for efficiencies that may be
gained from sales, consolidations or closures of under-performing branches.
4
Lending Activities
General. The principal lending activity of the Bank is the origination of
commercial business loans, commercial real estate loans, small business loans,
SBA guaranteed loans, home equity loans, residential real estate loans and other
consumer related loans, including installment loans. Substantially all loans are
originated in the Bank's primary market area.
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 with the Small
Business Banking division serving all other companies. The Bank's primary focus
is the origination of commercial loans. 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. As noted above, in
the fourth quarter 2004, the Company established a LPO in Short Hills, New
Jersey. This new facility was created to accelerate commercial loan growth and
expand the Company's market presence north of its existing footprint. The
products offered by the LPO will be consistent with the bank's current
commercial and industrial loans.
The trend of the Bank's lending over the past several years has been
diversification of commercial and industrial loans. A large, but declining
portion of the total portfolio is concentrated in the hospitality, entertainment
and leisure industries and 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. At December 31, 2004, 10.3% of total loans
outstanding were concentrated in hotel loans compared to 11.5% at December 31,
2003.
Commercial and industrial loans because of their nature and larger size
generally involve a greater degree of risk. 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. The bank's commercial real estate loans are
predominantly owner occupied real estate.
5
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 rates charged on such
loans can be fixed or floating and are 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.
Second Mortgage Loans. The Bank originates second mortgage loans, secured
by a mortgage lien against the applicant's 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 views residential real estate loans
as a relationship enhancement product. 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.
Other Loans. Included in other loans in addition to installment and
consumer loans are certain small business loans serving businesses with credit
needs up to $250,000. These small business loans are generally credit lines with
check writing capabilities or small business loans with overdraft protection
attached. At December 31, 2004, the Bank had $26.5 million of these small
business loans.
At December 31, 2004, the Bank had $2.5 million of installment loans
secured by a variety of collateral, such as new and used automobiles, boats and
certificates of deposits and $5.7 million of unsecured installment 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.
The Bank has a modular housing portfolio with $27.3 million in loans
outstanding as of December 31, 2004. This activity is generated through a third
party arrangement, which began in 1990. These loans
6
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.
Loan Solicitation and Processing. Loan originations are derived from a
number of sources such as loan officers, existing customers and borrowers and
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 and evaluated, a credit decision is made. Depending on the loan type,
collateral and amount of the credit request, various levels of approval are
required. 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 coordinated lending authority by groups of loan
and credit officers. 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 may assign
interim lending authorities within the LAM to individual loan and credit
officers and report 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. Each regional lending area is supported by a dedicated SCO.
Loan Commitments. When a commercial loan is approved, the Bank issues a
written commitment to the loan applicant. 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 loan commitment is valid for approximately 45
days. Title insurance policies are generally required on all first mortgage
loans. The borrower must provide proof of fire, flood (if applicable) and
casualty insurance on the property serving as collateral. Insurance must be
maintained during the full term of the loan. At December 31, 2004, the Bank had
approximately $180.8 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
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to identify and, monitor and report 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 which are 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 primary 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. The Bank may obtain advances from the Federal Home Loan Bank
(the "FHLB") of New York to supplement its funding requirements. Such advances
must be secured by a pledge of a portion of the Bank's first mortgage loans and
other collateral acceptable to the FHLB. 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,
2004, the Bank had $144.7 million in secured FHLB advances. See "Management's
Discussion and Analysis of Financial Condition and Results of Operations -
Borrowings" in the Company's 2004 Annual Report to Shareholders.
Securities Sold Under Agreement to Repurchases. The Bank has overnight
repurchase agreements with customers as well as repurchase agreements with the
FHLB. The Bank obtains funds through overnight repurchase agreements with
customers pursuant to which the Bank sells U.S. Treasury notes or securities
issued or guaranteed by one of the Government Sponsored Enterprises to customers
under an agreement to repurchase them, at par, on the next business day. At
December 31, 2004, the amount of securities under agreements to repurchase with
customers totaled $59.6 million. In addition, the Bank may obtain funds through
short term repurchase agreements with the FHLB. At December 31, 2004, the
Company had one, thirty day maturity, $50.0 million FHLB repurchase agreement.
Collateral for the FHLB repurchase agreement consisted of securities issued or
guaranteed by Government Sponsored Enterprises. 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.
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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 of 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 the third quarter of 2004, the Bank entered into a
relationship with a third party to develop a referral program with lease
financing products. Under this program, the third party will assist the Bank in
offering leasing products to its commercial customers. Leases will be
underwritten by the Bank as based on the creditworthiness of the Bank's customer
who will be the lessee with the third party being the lessor. A loan will be
made to the third party leasing company on a non-recourse basis for the purchase
of the asset being leased. The loan will be secured by an assignment of third
party's interest as lessor and by a lien on the asset being leased. The third
party will make an effective equity investment into each transaction for the
balance of the total funded amount based on an accelerated repayment of the
Bank's loan. The third party will provide complete documentation services,
portfolio administration and disposal or sale of equipment. Under the program,
the Bank can provide leases to its customers with minimal operating expense and
no additional risk beyond normal underwriting.
Customer Derivatives. To accommodate customer needs, the Bank also enters
into financial derivative transactions primarily consisting of interest rate
swaps. Market risk exposure from customer positions is managed through
transactions with third-party dealers. The credit risk associated with
derivatives executed with customers is essentially the same as that involved in
extending loans and is subject to normal credit policies. Collateral may be
obtained based on management's assessment of the customer. The positions of
customer derivatives are recorded at fair value and changes in value are
included in non-interest income.
SBA Loan Sales. In accordance with its strategic plan to enter the SBA
lending market, in May 2004, the Bank was approved as an SBA Express Lender and
by October 2004 received SBA Preferred Lender Status in New Jersey. The Bank was
awarded the New Jersey District Director's Award as the Breakthrough Lender of
the Year in 2004. The Bank's strategy is to sell the guaranteed portion of each
SBA term loan in the secondary market to generate fee income. In 2004, the Bank
recognized $289,000 from the sale of SBA loans and anticipates that this trend
will continue and grow in 2005.
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
9
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.
Personnel
At December 31, 2004, the Company had 752 full-time and 148 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
10
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 will 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.
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, 2004, 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, 2004. 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.
11
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 $34.7 million at December 31, 2004. 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 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, 2004, 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
12
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 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, 2004, 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, 2004, the Company operated from its main office in
Vineland, New Jersey and 73 Community Banking Centers. The Bank leases its main
office and 46 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
13
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, 2004.
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 2004 Annual Report to Shareholders, filed as
Exhibit 13 to this Report (the "Annual Report"), is incorporated herein by
reference.
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 are
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) 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
14
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) Internal Control over Financial Reporting
1. Management's Annual Report on Internal Control Over Financial
Reporting.
Management's report on the Company's internal control over financial
reporting appears in the Company's Annual Report filed as Exhibit 13 and is
incorporated herein by reference.
2. Report of Independent Registered Public Accounting Firm.
The report of Deloitte & Touche LLP on management's assessment of the
Company's internal control over financial reporting appears in the Company's
Annual Report filed as Exhibit 13 and is incorporated herein by reference.
3. 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.
Item 9B. Other Matters
- -----------------------
Not applicable.
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 2004 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 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.
15
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, 2004 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 securities
Number of securities remaining available
to be issued upon Weighted-average for future issuance under
exercise of exercise price of equity compensation plans
outstanding options, outstanding options, (excluding securities
warrants and rights warrants and rights reflected in column (a))
-------------------- ------------------- -------------------------
Equity compensation plans
Approved by shareholders(1) 3,125,826 $9.70 485,720
Equity compensation plans
not approved by shareholders(2) - - -
--------- ----- --------
TOTAL 3,125,826 $9.70 485,720
========= ===== =======
------------
(1) Plans approved by shareholders include the 1995 Stock Option Plan, the 1997
Stock Option Plan, the 2002 Stock Option Plan and the 2004 Stock
Based-Incentive Plan. The amount of securities includes options for 333,858
shares of our common stock as a result of our assuming obligations under
stock option plans of Community Bancorp of New Jersey in connection with an
acquisition in 2004. While we assumed the obligations existing under these
plans as of the time of merger, we have not and will not in the future, use
them to make further grants.
(2) Not Applicable.
16
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 and Financial Statement Schedules
- ---------------------------------------------------
(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.
Report of Independent Public Accounting Firm
Consolidated Statements of Financial Condition as of December 31, 2004
and 2003
Consolidated Statements of Income for the Years Ended December 31,
2004, 2003 and 2002
Consolidated Statements of Shareholders' Equity for the Years Ended
December 31, 2004, 2003 and 2002
Consolidated Statements of Cash Flows for the Years Ended December 31,
2004, 2003 and 2002
Notes to Consolidated Financial Statements
(2) There are no financial statements schedules that are required to
be included in Part II, Item 8.
17
(b) 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)
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(8)
10.7 2004 Stock-Based Incentive Plan(9)
11 Computation regarding earnings per share(10)
13 2004 Annual Report to Shareholders
21 Subsidiaries of the Registrant
23 Consent of Deloitte & Touche LLP
31 Certifications 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 Exhibit 3(i) to the Company's Registration
Statement on Form S-3 (File No. 333-109636) filed with the SEC on October
10, 2003.
(2) Incorporated by reference to Exhibit 3(ii) to the Company's Registration
Statement on Form S-3 (File No. 333-109636) filed with the SEC on October
10, 2003.
(3) Incorporated by reference to Exhibit 10 to the Company's Registration
Statement on Form 10 filed with the SEC on June 28, 1996 (File No.
0-20957).
(4) Incorporated by reference Exhibit 10.3 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 2002 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 Exhibit 10.4 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 Exhibit 10.6 to the Company's Annual Report on
Form 10-K for the fiscal year ended December 31, 2000 (File No. 0-20957).
(9) Incorporated by reference to Exhibit H to the Company's Joint Proxy
Statement for the 2004 Annual Meeting of Shareholders in the Company's
Registration Statement on Form S-4, filed with the SEC on April 29, 2004
(File No. 0-20957).
(10) Incorporated by reference to Note 23 of the Notes to Consolidated Financial
Statements of the Company included in Exhibit 13 hereto.
18
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 15, 2005.
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 15, 2005.
/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/Douglas J. Heun /s/Charles P. Kaempffer
- ------------------------------------- --------------------------------------
Douglas J. Heun Charles P. Kaempffer
Director Director
/s/Anne E. Koons /s/Eli Kramer
- ------------------------------------- --------------------------------------
Anne E. Koons Eli Kramer
Director Director
/s/Alfonse M. Mattia /s/Audrey S. Oswell
- ------------------------------------- --------------------------------------
Alfonse M. Mattia Audrey S. Oswell
Director Director
/s/George A. Pruitt /s/Anthony Russo, III
- ------------------------------------- --------------------------------------
George A. Pruitt Anthony Russo, III
Director Director
/s/Edward H. Salmon /s/Howard M. Schoor
- ------------------------------------- --------------------------------------
Edward H. Salmon Howard M. Schoor
Director Director
/s/John D. Wallace /s/Dan A. Chila
- ------------------------------------- --------------------------------------
John D. Wallace Dan A. Chila
Director Executive Vice President and Chief
Financial Officer
(Principal Accounting Officer)