Upward estimate revisions on the back of strong third quarter
results - including an earnings surprise of 200.0% - have helped
Sun Bancorp Inc.
) achieve a Zacks #1 Rank (Strong Buy) on January 1. With a solid
return of 37.2% in the last year, this provider of various
commercial and consumer banking services offers an attractive
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The Rank Drivers
Better-than-expected third quarter results, improving credit
quality and strong capital ratios are the primary rank drivers
for this stock.
Sun Bancorp reported its third quarter results on October 24 with
earnings per share of 1 cent, beating the Zacks Consensus
Estimate loss of 1 cent by 200.0%, but lagged the year-ago
earnings of 3 cents by 66.7%. Higher non-interest income and
reduced provision for loan losses were the positives for the
Non-interest income jumped 65.5% year over year to $9.6 million.
Provision for loan losses skidded 17.4% from the year-ago quarter
to $1.9 million.
Non-interest expenses, which increased 14.4% on a year-over year
basis to $30.9 million and net interest income, that descended
7.3% year over year to $24.3 million, were the dampeners for the
quarter. Moreover, net interest margin contracted 20 basis points
year over year to 3.41%, mainly due to persistent pressure in the
current interest rate environment.
Credit quality continued to exhibit improvement. The allowance
for loan losses was 2.12% of gross loans as of September 30,
2012, compared with 2.39% of total loans as of September 30,
2011. Non-performing assets for the quarter were $126.4 million,
dipping 10.2% from the prior-year period. Net charge-offs were
$4.2 million, down 27.6% year over year.
As of September 30, 2012, Sun Bancorp's total risk-based capital
ratio was 14.30%, Tier 1 capital ratio was 12.73% and leverage
capital ratio was 10.43%, above the "well-capitalized" regulatory
requirements of 10.00%, 6.00% and 5.00%, respectively.
Earnings Estimate Revisions
Over the past 60 days, upward revisions of 3 out of 5 estimates
pushed the Zacks Consensus Estimate for 2012 up from loss of 32
cents to 31 cents per share. The Zacks Consensus Estimate for
2013 advanced 50.0% to 3 cents.
On a price-to-book basis, the shares of Sun Bancorp are trading
at 1.0x, a 23.0% discount to the peer group average of 1.3x.
Given the company's strong fundamentals, the valuation looks
About the Company
Headquartered in Vineland, New Jersey, Sun Bancorp serves as the
bank holding company for Sun National Bank. It operates through
65 locations in New Jersey and offers an array of commercial and
consumer banking services. The company, which was founded in
1985, has a market capitalization of roughly $304.7 million.
Other Zacks #1 Rank bank stocks include
Timberland Bancorp Inc.
Pacific Continental Corp.